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Mediation Role of Economic Freedom in the nexus between Financial Integration and Inclusive Growth in Africa

Author

Listed:
  • Khadijah Iddrisu

    (Accra, Ghana)

  • Simplice A. Asongu

    (Johannesburg, South Africa)

  • Eric Kofi Boadi

    (Koforidua, Ghana)

Abstract

The financial integration literature has mostly focused on traditional growth measures, which is a narrow form of growth. To enhance the body of knowledge on financial integration, this study addresses a gap in the existing literature by adopting a broader perspective on growth, specifically focusing on inclusive growth. Also, it has largely neglected one of the mechanisms through which financial integration enhances growth. Consequently, this study contributes to the existing knowledge by analysing how economic freedom mediates the relationship between financial integration and inclusive growth in a panel of 40 African countries from 2020 to 2021. The empirical results are based on the instrumental variable generalised method of moments (IV-GMM). The findings show that financial integration promotes inclusive growth in Africa. In addition, the results revealed a partial mediation effect of economic freedom in the financial integration-inclusive growth nexus. The study recommends that policymakers should simplify regulations and cut bureaucratic hurdles for financial institutions and businesses. Strengthening legal frameworks to protect property rights and enforce contracts is essential for economic freedom. This enhances investor confidence, aids financial integration, and promotes inclusive growth.

Suggested Citation

  • Khadijah Iddrisu & Simplice A. Asongu & Eric Kofi Boadi, 2025. "Mediation Role of Economic Freedom in the nexus between Financial Integration and Inclusive Growth in Africa," Working Papers of the African Governance and Development Institute. 25/011, African Governance and Development Institute..
    • Handle: RePEc:agd:wpaper:25/011
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    File Function: Revised version, 2025
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    Keywords

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    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • P48 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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