IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/37631.html
   My bibliography  Save this paper

Are financial benefits of financial globalization questionable until greater domestic financial development has taken place?

Author

Listed:
  • Simplice A, Asongu

Abstract

Purpose – The issue of which financial initial conditions are necessary to materialize the benefits of financial globalization remains open to debate in the literature. In this paper, we try to put some empirical structure on the concept of financial threshold conditions in order to give policymakers guidance on the Kose et al.(2011) and Henry(2007) hypothesis. Its object is to assess if financial benefits of financial globalization are questionable until greater domestic financial development has taken place in developing countries. Design/methodology/approach – In framing the financial dimension in a more concrete and tractable manner, we probe into the concerns of how domestic financial initial dynamics of depth(economic and financial systems), efficiency(banking and financial systems), activity (banking and financial systems) and size play-out in the financial development benefits of financial globalization. The estimation approach consists of assessing the impact of financial globalization through-out the conditional distributions of domestic financial development dynamics. Findings – The introduction of previously missing financial dimensions into the debate generates a number of important findings. Only financial initial(threshold) conditions in depth and size are necessary to materialize the benefits of financial globalization. Domestic dynamics of efficiency and activity(credit) do not confirm the hypothesis. Practical implications – Depending on the context of sampled countries, the appropriate role of policy has always been either to stem the tide of capital flows or encourage them. Policymakers who have been viewing their challenges exclusively from the later perspective for benefits in growth(finance) might be getting the financial dynamics badly wrong. Originality/value – Blanket financial development policies may not reap the financial benefits of financial globalization until domestic financial dynamics of depth, efficiency, activity and size are critically considered. The introduction of the last three previously missing components in the literature sheds more light on the globalization-development nexus.

Suggested Citation

  • Simplice A, Asongu, 2012. "Are financial benefits of financial globalization questionable until greater domestic financial development has taken place?," MPRA Paper 37631, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:37631
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/37631/1/MPRA_paper_37631.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Maurice Obstfeld, 1998. "The Global Capital Market: Benefactor or Menace?," Journal of Economic Perspectives, American Economic Association, vol. 12(4), pages 9-30, Fall.
    2. Simplice A. Asongu, 2014. "Finance and Democracy in Africa," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 6(3), pages 92-116, October.
    3. repec:srs:jarle2:1:v:2:y:2011:i:2:p:94-108 is not listed on IDEAS
    4. Asongu Simplice, 2012. "Reversed Economics and Inhumanity of Development Assistance in Africa," Working Papers of the African Governance and Development Institute. 12/034, African Governance and Development Institute..
    5. Peter Blair Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Journal of Economic Literature, American Economic Association, vol. 45(4), pages 887-935, December.
    6. Okada, Keisuke & Samreth, Sovannroeun, 2012. "The effect of foreign aid on corruption: A quantile regression approach," Economics Letters, Elsevier, vol. 115(2), pages 240-243.
    7. repec:srs:journl:jarle:v:2:y:2011:i:4:p:94-108 is not listed on IDEAS
    8. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 21-42, Fall.
    9. 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.
    10. Simplice Anutechia Asongu, 2012. "Bank Efficiency and Openness in Africa: Do Income Levels Matter?," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 4(2), pages 115-122, December.
    11. Simplice A. Asongu, 2012. "Law and Finance in Africa," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(4), pages 385-408.
    12. Simplice A, Asongu, 2012. "The political economy of development assistance: peril to government quality dynamics in Africa," MPRA Paper 36543, University Library of Munich, Germany.
    13. Ayhan Kose, M. & Prasad, Eswar S. & Taylor, Ashley D., 2011. "Thresholds in the process of international financial integration," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 147-179, February.
    14. Simplice A., Asongu, 2011. "Globalization, financial allocation efficiency and regional economic dynamics: asymmetric panel evidence from Africa," MPRA Paper 33901, University Library of Munich, Germany.
    15. Billger, Sherrilyn M. & Goel, Rajeev K., 2009. "Do existing corruption levels matter in controlling corruption?: Cross-country quantile regression estimates," Journal of Development Economics, Elsevier, vol. 90(2), pages 299-305, November.
    16. 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.
    17. Simplice A., Asongu, 2011. "New financial intermediary development indicators for developing countries," MPRA Paper 30921, University Library of Munich, Germany.
    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. Simplice Asongu, 2015. "Liberalisation and Financial Sector Competition: A Critical Contribution to the Empirics with an African Assessment," South African Journal of Economics, Economic Society of South Africa, vol. 83(3), pages 425-451, September.
    2. Asongu Simplice, 2014. "Development thresholds of foreign aid effectiveness in Africa," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 41(11), pages 1131-1155, November.
    3. Asongu Simplice, 2013. "Globalization and Financial Market Contagion: Evidence from Financial Crisis and Natural Disasters," Working Papers of the African Governance and Development Institute. 13/035, African Governance and Development Institute..
    4. Simplice A. Asongu, 2015. "Institutional benchmarking of foreign aid effectiveness in Africa," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 42(6), pages 543-565, June.
    5. 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..

    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. Simplice A, Asongu, 2012. "Financial development dynamic thresholds of financial globalization: evidence from Africa," MPRA Paper 44254, University Library of Munich, Germany.
    2. 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.
    3. Simplice A. Asongu & Joseph Nnanna & Vanessa S. Tchamyou, 2020. "The comparative African regional economics of globalization in financial allocation efficiency: the pre-crisis era revisited," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 6(1), pages 1-41, December.
    4. Asongu, Simplice & Tchamyou, Vanessa, 2015. "The Comparative African Regional Economics of Globalization in Financial Allocation Efficiency," MPRA Paper 71173, University Library of Munich, Germany.
    5. 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.
    6. Asongu Simplice, 2014. "Development thresholds of foreign aid effectiveness in Africa," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 41(11), pages 1131-1155, November.
    7. Asongu Simplice, 2014. "Fresh Patterns of Liberalization, Bank Return and Return Uncertainty in Africa," Working Papers of the African Governance and Development Institute. 14/004, African Governance and Development Institute..
    8. 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.
    9. 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.
    10. Simplice A. Asongu, 2015. "Institutional benchmarking of foreign aid effectiveness in Africa," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 42(6), pages 543-565, June.
    11. 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..
    12. 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.
    13. Simplice A, Asongu, 2012. "How has mobile banking stimulated financial development in Africa?," MPRA Paper 38576, University Library of Munich, Germany.
    14. Asongu Simplice, 2013. "Globalization and Africa: implications for human development," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 12(3), pages 213-238, September.
    15. Simplice A. Asongu, 2014. "Finance and Democracy in Africa," Institutions and Economies (formerly known as International Journal of Institutions and Economies), Faculty of Economics and Administration, University of Malaya, vol. 6(3), pages 92-116, October.
    16. Kodila-Tedika, Oasis & Asongu, Simplice A. & Cinyabuguma, Matthias & Tchamyou, Vanessa S., 2017. "Financial development and prehistoric geographical isolation: global evidence," Financial History Review, Cambridge University Press, vol. 24(3), pages 283-306, December.
    17. Simplice A Asongu & Lieven De Moor, 2017. "Financial Globalisation Dynamic Thresholds for Financial Development: Evidence from Africa," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 29(1), pages 192-212, January.
    18. Simplice Anutechia Asongu, 2014. "The Evolving Debate on the Effect of Foreign Aid on Corruption and Institutions in Africa," AAYE Policy Research Working Paper Series 14_021, Association of African Young Economists, revised Nov 2014.
    19. Simplice A. Asongu & Pritam Singh & Sara Le Roux, 2018. "Fighting Software Piracy: Some Global Conditional Policy Instruments," Journal of Business Ethics, Springer, vol. 152(1), pages 175-189, September.
    20. Asongu Simplice & Nwachukwu Jacinta, 2017. "Globalization and Inclusive Human Development in Africa," Man and the Economy, De Gruyter, vol. 4(1), pages 1-24, June.

    More about this item

    Keywords

    Banking; International investment; Financial integration; Development;
    All these keywords.

    JEL classification:

    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F30 - International Economics - - International Finance - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

    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:37631. 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.