IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/35500.html
   My bibliography  Save this paper

Finance and democracy in Africa

Author

Listed:
  • Simplice A, Asongu

Abstract

The motivations of the Arab Spring and hitherto unanswered questions about some of its dynamics inspired this paper, which focuses on how democracy, polity and autocracy affect financial development dynamics of depth, efficiency, activity and size in Africa; contingent on religious-domination, income-levels and colonial-legacies. Findings could be summarized in the following. (1) Authoritarian regimes have a higher propensity to effect policies that favor the development of financial intermediary depth, activity and size. Democracy has important effects on the degree of competition for public offices but less significant effects in comparison with autocracy on policies towards financial development. (2) Christian-dominated countries have higher (lower) levels of financial intermediation efficiency (depth) than-Islam oriented countries. (3) Income-levels also matter in financial development as poor countries have a lower propensity to improve their financial dynamics than wealthy states. (4) On average English common-law countries have better democratic institutions that their French civil-law counterparts. (5) There is evidence of a U-shape relationship between national wealth and the level of democracy, with Low-income countries experiencing lower (higher) levels of democracy than Upper (Lower) middle income countries. As a policy implication, once democracy is initiated, it should be accelerated (to edge the appeals of authoritarian regimes) and reap the benefits of level and time hypotheses in financial development.

Suggested Citation

  • Simplice A, Asongu, 2011. "Finance and democracy in Africa," MPRA Paper 35500, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:35500
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/35500/3/MPRA_paper_35500.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Narayan, Paresh Kumar & Narayan, Seema & Smyth, Russell, 2011. "Does democracy facilitate economic growth or does economic growth facilitate democracy? An empirical study of Sub-Saharan Africa," Economic Modelling, Elsevier, vol. 28(3), pages 900-910, May.
    2. Gyimah-Brempong, Kwabena & Traynor, Thomas L, 1999. "Political Instability, Investment and Economic Growth in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 8(1), pages 52-86, March.
    3. Levine, Ross & Zervos, Sara, 1998. "Stock Markets, Banks, and Economic Growth," American Economic Review, American Economic Association, vol. 88(3), pages 537-558, June.
    4. Simplice Asongu, 2014. "Are proposed African monetary unions optimal currency areas? Real, monetary and fiscal policy convergence analysis," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 5(1), pages 9-29, April.
    5. William Easterly & Ross Levine, 1997. "Africa's Growth Tragedy: Policies and Ethnic Divisions," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1203-1250.
    6. Dani Rodrik, 2006. "Institutions for High-Quality Growth: What They Are and How to Acquire Them," Chapters, in: Kartik Roy & Jörn Sideras (ed.), Institutions, Globalisation and Empowerment, chapter 2, Edward Elgar Publishing.
    7. Asongu Simplice, 2012. "Fighting consumer price inflation in Africa. What do dynamics in money, credit, efficiency and size tell us?," Working Papers of the African Governance and Development Institute. 12/011, African Governance and Development Institute..
    8. Stulz, Rene M. & Williamson, Rohan, 2003. "Culture, openness, and finance," Journal of Financial Economics, Elsevier, vol. 70(3), pages 313-349, December.
    9. Olivier Blanchard & Andrei Shleifer, 2001. "Federalism With and Without Political Centralization: China Versus Russia," IMF Staff Papers, Palgrave Macmillan, vol. 48(4), pages 1-8.
    10. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer, 2002. "Government Ownership of Banks," Journal of Finance, American Finance Association, vol. 57(1), pages 265-301, February.
    11. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Law and finance: why does legal origin matter?," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 653-675, December.
    12. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    13. Badawi, Ibrahim El & Makdisi, Samir, 2007. "Explaining the democracy deficit in the Arab world," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(5), pages 813-831, February.
    14. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    15. Guillaumont, Patrick & Jeanneney, Sylviane Guillaumont & Brun, Jean-Francois, 1999. "How Instability Lowers African Growth," Journal of African Economies, Centre for the Study of African Economies, vol. 8(1), pages 87-107, March.
    16. Simplice A. Asongu, 2015. "Law,Finance, Economic Growth and Welfare: Why Does Legal Origin Matter?," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 7(2), pages 30-55, July.
    17. Federico Varese, 1997. "The Transition to the Market and Corruption in Post–socialist Russia," Political Studies, Political Studies Association, vol. 45(3), pages 579-596, August.
    18. Simplice A. Asongu, 2012. "Law and Finance in Africa," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(4), pages 385-408.
    19. Simplice A. Asongu, 2014. "African financial development dynamics: big time convergence," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 5(2), pages 160-194, July.
    20. Asongu Simplice, 2011. "Government Quality Determinants of Stock Market Performance in African Countries," Working Papers of the African Governance and Development Institute. 11/019, African Governance and Development Institute..
    21. Simplice A Asongu, 2012. "On the effect of foreign aid on corruption," Economics Bulletin, AccessEcon, vol. 32(3), pages 2174-2180.
    22. Robert G. King & Ross Levine, 1993. "Finance and Growth: Schumpeter Might Be Right," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(3), pages 717-737.
    23. Jagdish Bhagwati, 1995. "Democracy and Development: New Thinking on an Old Question," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 30(1), pages 1-18, January.
    24. Lemarchand, René, 1972. "Political Clientelism and Ethnicity in Tropical Africa:* Competing Solidarities in Nation-Building," American Political Science Review, Cambridge University Press, vol. 66(1), pages 68-90, March.
    25. Simplice A. Asongu, 2016. "Law and Investment in Africa," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 8(2), pages 95-124, April.
    26. Hristos Doucouliagos & Mehmet Ali Ulubaşoğlu, 2008. "Democracy and Economic Growth: A Meta‐Analysis," American Journal of Political Science, John Wiley & Sons, vol. 52(1), pages 61-83, January.
    27. Ghura, Dhaneshwar, 1995. "Macro Policies, External Forces, and Economic Growth in Sub-Saharan Africa," Economic Development and Cultural Change, University of Chicago Press, vol. 43(4), pages 759-778, July.
    28. Simplice ASONGU, 2011. "Why Do French Civil Law Countries Have Higher Levels Of Financial Efficiency," Journal of Advanced Research in Law and Economics, ASERS Publishing, vol. 2(4), pages 94-108.
    29. Simplice A., Asongu, 2011. "New financial intermediary development indicators for developing countries," MPRA Paper 30921, University Library of Munich, Germany.
    30. Simplice A. Asongu, 2013. "Real and monetary policy convergence: EMU crisis to the CFA zone," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 5(1), pages 20-38, April.
    31. Clague, Christopher & Keefer, Philip & Knack, Stephen & Olson, Mancur, 1996. "Property and Contract Rights in Autocracies and Democracies," Journal of Economic Growth, Springer, vol. 1(2), pages 243-276, June.
    32. Simplice A., Asongu, 2011. "Law, Finance and Investment: does legal origin matter?," MPRA Paper 34698, University Library of Munich, Germany.
    33. Yang, Benhua, 2011. "Does democracy foster financial development? An empirical analysis," Economics Letters, Elsevier, vol. 112(3), pages 262-265, September.
    34. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
    35. Rajan, Raghuram G. & Zingales, Luigi, 2003. "The great reversals: the politics of financial development in the twentieth century," Journal of Financial Economics, Elsevier, vol. 69(1), pages 5-50, July.
    36. Ojo, Oladeji & Oshikoya, Temitope, 1995. "Determinants of Long-Term Growth: Some African Results," Journal of African Economies, Centre for the Study of African Economies, vol. 4(2), pages 163-191, October.
    37. Wade, Robert, 1985. "The market for public office: Why the Indian state is not better at development," World Development, Elsevier, vol. 13(4), pages 467-497, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Asongu, Simplice & Odhiambo, Nicholas, 2022. "The paradox of governance and natural resource rents in Sub-Saharan Africa," MPRA Paper 119066, University Library of Munich, Germany.
    2. Simplice Asongu, 2014. "Are proposed African monetary unions optimal currency areas? Real, monetary and fiscal policy convergence analysis," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 5(1), pages 9-29, April.
    3. Asongu, Simplice A & Odhiambo, Nicholas M, 2019. "Enhancing governance for environmental sustainability in Sub-Saharan Africa," Working Papers 26282, University of South Africa, Department of Economics.
    4. Asongu Simplice, 2012. "How has Mobile Banking Stimulated Financial Development in Africa?," Working Papers of the African Governance and Development Institute. 12/027, African Governance and Development Institute..
    5. Asongu Simplice, 2014. "Fighting African corruption when existing corruption-control levels matter in a dynamic cultural setting," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 41(10), pages 906-922, October.
    6. Simplice A. Asongu, 2013. "Real and monetary policy convergence: EMU crisis to the CFA zone," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 5(1), pages 20-38, April.
    7. Simplice A, Asongu, 2012. "Politics and Consumer Prices in Africa," MPRA Paper 36174, University Library of Munich, Germany.
    8. Asongu, Simplice & Nnanna, Joseph, 2020. "Governance and the Capital Flight Trap in Africa," MPRA Paper 103226, University Library of Munich, Germany.
    9. Asongu Simplice, 2012. "Are financial benefits of financial globalization questionable until greater domestic financial development has taken place?," Working Papers of the African Governance and Development Institute. 12/007, African Governance and Development Institute..
    10. Simplice A. Asongu & Jules R. Minkoua N., 2018. "Dynamic openness and finance in Africa," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 27(4), pages 409-430, May.
    11. Simplice A. Asongu, 2014. "African financial development dynamics: big time convergence," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 5(2), pages 160-194, July.
    12. Tii N. Nchofoung & Simplice A. Asongu & Vanessa S. Tchamyou & Ofeh M. Edoh, 2022. "Gender political inclusion and democracy in Africa: some empirical evidence," Working Papers 22/051, European Xtramile Centre of African Studies (EXCAS).
    13. Simplice A. Asongu & Cheikh T. Ndour & Judith C. M. Ngoungou, 2023. "The effects of gender political inclusion and democracy on environmental performance: evidence from the method of moments by quantile regression," Working Papers of the African Governance and Development Institute. 23/060, African Governance and Development Institute..
    14. Simplice A. Asongu, 2013. "How has Mobile Phone Penetration Stimulated Financial Development in Africa?," Journal of African Business, Taylor & Francis Journals, vol. 14(1), pages 7-18, April.
    15. Asongu, Simplice A & Odhiambo, Nicholas M, 2023. "Governance quality and trade performance in Sub-Saharan Africa," Working Papers 29697, University of South Africa, Department of Economics.
    16. Tii N. Nchofoung & Simplice A. Asongu & Vanessa S. Tchamyou & Ofeh M. Edoh, 2021. "Political inclusion and democracy in Africa: some empirical evidence," Working Papers 21/091, European Xtramile Centre of African Studies (EXCAS).
    17. Simplice A. Asongu & Thales P. Yapatake Kossele & Joseph Nnanna, 2021. "Not all that glitters is gold: political stability and trade in Sub-Saharan Africa," Research Africa Network Working Papers 21/005, Research Africa Network (RAN).
    18. Olufemi Adewale Aluko & Oladapo Fapetu & Julius Oyebanji Ibitoye, 2021. "Do Openness and Democracy Deepen Banking Sector in Sub-Saharan Africa?," Global Business Review, International Management Institute, vol. 22(2), pages 279-289, April.
    19. Asongu Simplice, 2012. "Are Proposed African Monetary Unions Optimal Currency Areas? Real and Monetary Policy Convergence Analysis," Working Papers of the African Governance and Development Institute. 12/005, African Governance and Development Institute..
    20. Arayssi, Mahmoud & Fakih, Ali, 2017. "Finance–growth nexus in a changing political region: How important was the Arab Spring?," Economic Analysis and Policy, Elsevier, vol. 55(C), pages 106-123.
    21. Asongu Simplice, 2012. "Linkages between Investment Flows and Financial Development: Causality Evidence from Selected African Countries," Working Papers of the African Governance and Development Institute. 12/029, African Governance and Development Institute..
    22. Simplice A Asongu, 2013. "How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence," Economics Bulletin, AccessEcon, vol. 33(1), pages 663-676.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Asongu Simplice, 2011. "Law, Democracy and the Quality of Government in Africa," Working Papers of the African Governance and Development Institute. 11/018, African Governance and Development Institute..
    2. Simplice A. Asongu, 2015. "Law,Finance, Economic Growth and Welfare: Why Does Legal Origin Matter?," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 7(2), pages 30-55, July.
    3. Asongu, Simplice & Nwachukwu, Jacinta, 2016. "Law, Politics and the Quality of Government in Africa," MPRA Paper 74231, University Library of Munich, Germany.
    4. Asongu Simplice, 2011. "Government Quality Determinants of Stock Market Performance in African Countries," Working Papers of the African Governance and Development Institute. 11/019, African Governance and Development Institute..
    5. Asongu Simplice, 2011. "Democracy and Stock Market Performance in African Countries," Working Papers of the African Governance and Development Institute. 11/021, African Governance and Development Institute..
    6. Simplice Asongu, 2014. "Law, Finance and Investment: Does Legal Origin Matter in Africa?," The Review of Black Political Economy, Springer;National Economic Association, vol. 41(2), pages 145-175, June.
    7. Simplice A. Asongu, 2012. "Law and Finance in Africa," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(4), pages 385-408.
    8. Simplice A. Asongu, 2017. "Knowledge Economy Gaps, Policy Syndromes, and Catch-Up Strategies: Fresh South Korean Lessons to Africa," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(1), pages 211-253, March.
    9. Simplice A. Asongu & Oasis Kodila-Tedika, 2018. "Determinants of Property Rights Protection in Sub-Saharan Africa," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 9(4), pages 1291-1308, December.
    10. Thorsten Beck & Ross Levine, 2008. "Legal Institutions and Financial Development," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 11, pages 251-278, Springer.
    11. Bill Francis & Eric Ofori, 2015. "Political regimes and stock market development," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(1), pages 111-137, June.
    12. Simplice A. Asongu, 2016. "Law and Investment in Africa," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 8(2), pages 95-124, April.
    13. Fogel, Kathy & Morck, Randall & Yeung, Bernard, 2008. "Big business stability and economic growth: Is what's good for General Motors good for America?," Journal of Financial Economics, Elsevier, vol. 89(1), pages 83-108, July.
    14. Allen, Franklin & Qian, Jun & Qian, Meijun, 2005. "Law, finance, and economic growth in China," Journal of Financial Economics, Elsevier, vol. 77(1), pages 57-116, July.
    15. Asongu Simplice, 2012. "Financial determinants of consumer price inflation. What do dynamics in money, credit, efficiency and size tell us?," Working Papers of the African Governance and Development Institute. 12/019, African Governance and Development Institute..
    16. Simplice A. Asongu, 2017. "The Comparative Economics of Knowledge Economy in Africa: Policy Benchmarks, Syndromes, and Implications," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 8(2), pages 596-637, June.
    17. Séraphin PRAO YAO* & Kamalan Eugène, 2018. "Institutions and Financial Development in African Countries: An Empirical Analysis," Business, Management and Economics Research, Academic Research Publishing Group, vol. 4(5), pages 43-50, 05-2018.
    18. Buchen, Clemens, 2010. "Emerging economic systems in Central and Eastern Europe – a qualitative and quantitative assessment," EconStor Theses, ZBW - Leibniz Information Centre for Economics, number 37141, March.
    19. Chris Doucouliagos & Jakob de Haan & Jan-Egbert Sturm, 2022. "What drives financial development? A Meta-regression analysis [A new database of financial reforms]," Oxford Economic Papers, Oxford University Press, vol. 74(3), pages 840-868.
    20. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Law, endowments, and finance," Journal of Financial Economics, Elsevier, vol. 70(2), pages 137-181, November.

    More about this item

    Keywords

    Banking; Finance; Politics; Democracy; Development;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • P50 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:35500. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.