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Financial instability, financial openness and economic growth in african countries

Author

Listed:
  • Batuo Enowbi, Michael
  • Kupukile, Mlambo

Abstract

In the aftermath of the recent global financial crisis, the implication of financial liberalisation for stability and economic growth has come under increasing scrutiny. One strand of literature posits a positive relationship between financial liberalisation and economic growth and development. However, others emphasise that the link between financial liberalisation is intrinsically associated with financial instability which may be harmful to economic growth and development. In this study, we offer an empirical analysis assessing the relationship between financial instability, financial liberalisation, financial development and economic growth based on a dataset of 41 African countries spanning the years 1985-2010. The results suggest that the link between financial development and liberalisation has a positive and significant effect on financial instability but the latter has a harmful effect on economic growth, which are more pronounced in the pre- financial liberalisation periods than in the post-liberalisation.

Suggested Citation

  • Batuo Enowbi, Michael & Kupukile, Mlambo, 2012. "Financial instability, financial openness and economic growth in african countries," MPRA Paper 43340, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:43340
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    File URL: https://mpra.ub.uni-muenchen.de/43340/1/MPRA_paper_43340.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Economic Growth; Financial Development; Financial instability; Africa;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G01 - Financial Economics - - General - - - Financial Crises

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