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Financial liberalisation, financial development and financial crises in SADC countries

Author

Listed:
  • Clement Moyo

    (Department of Economics, Nelson Mandela University)

  • Pierre Le Roux

    (Department of Economics, Nelson Mandela University)

Abstract

The issue of financial reforms and financial development has received considerable attention over the recent past. A number of recent studies conclude that financial development may hinder economic growth. Therefore, to shed light on this negative relationship, this study investigates whether financial liberalisation and financial development increase the likelihood financial crises in SADC countries. The logit model is employed for the analysis using data for the period 1990 to 2015. The results showed that financial liberalisation captured by real interest rates and capital account openness reduces the likelihood of financial crises. On the other hand, financial development represented by bank credit, increases the incidence of financial crises. Therefore, financial liberalisation may increase the likelihood of financial crises indirectly through financial development. The study recommends that a sound regulatory and supervisory framework be established as well as institutional quality raised to curb the effect of financial development on the incidence of financial crises.

Suggested Citation

  • Clement Moyo & Pierre Le Roux, 2018. "Financial liberalisation, financial development and financial crises in SADC countries," Working Papers 1835, Department of Economics, Nelson Mandela University, revised Nov 2018.
    • Handle: RePEc:mnd:wpaper:1835
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    File URL: http://repec.mandela.ac.za/RePEc/mnd/wpaper/paper.1835.pdf
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    Cited by:

    1. Babar Hussain & Muhammad Naveed Tahir & Bahawal Khan, 2022. "Impact of Financial Development, Financial Liberalization and Economic Growth on Financial Instability: Evidence from Panel Data," Journal of Economic Impact, Science Impact Publishers, vol. 4(2), pages 142-151.
    2. Khamdan Rifa'i, 2023. "The Economic Impact of the US Unconventional Monetary Policy, Global Commodity Shocks, and Oil Price Shocks on ASEAN 3," International Journal of Energy Economics and Policy, Econjournals, vol. 13(5), pages 616-624, September.
    3. Clement Olalekan Olaniyi, 2022. "On the transmission mechanisms in the finance–growth nexus in Southern African countries: Does institution matter?," Economic Change and Restructuring, Springer, vol. 55(1), pages 153-191, February.
    4. Mustansar, Talreja, 2023. "Financial innovation, technological improvement and bank’ profitability," OSF Preprints 8wy95, Center for Open Science.

    More about this item

    Keywords

    Financial liberalisation; financial crises; financial development; logit model.;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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