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How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence

  • Asongu, Simplice A

This paper investigates how financial, trade, institutional and political liberalization policies have affected financial efficiency in Africa. It uses updated data to appraise second generation reforms in order to gather fresh evidence and derive more updated policy implications. The ‘freedom to trade’ and ‘economic freedom’ indices are also employed. The following findings are established. (1) Financial liberalization mitigates financial allocation efficiency, with the magnitude of the de jure indicator (KAOPEN) higher than that of the de facto measurement (FDI). (2) Exports significantly improve financial efficiency. (3) Institutional liberalization has a positive effect on the efficiency of allocation while the effect of political liberalization is not significant. (4) Freedom of trade decreases (improves) financial (banking) system efficiency. (5) Economic freedom facilitates the transformation of mobilized financial resources (deposits) into credit for economic operators. Justifications for these nexuses are provided.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 44995.

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Date of creation: 03 Jan 2013
Date of revision:
Publication status: Published in Economics Bulletin 1.33(2013): pp. 663-676
Handle: RePEc:pra:mprapa:44995
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  1. Simplice A, Asongu, 2012. "How has Mobile Phone Penetration Stimulated Financial Development in Africa?," MPRA Paper 41198, University Library of Munich, Germany.
  2. Simplice Asongu, 2013. "Harmonizing IPRs on Software Piracy: Empirics of Trajectories in Africa," Journal of Business Ethics, Springer, vol. 118(1), pages 45-60, November.
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  12. Asongu Simplice, 2010. "Bank Efficiency and Openness in Africa: Do Income Levels Matter?," Working Papers 10/001, African Governance and Development Institute., revised 18 Dec 2011.
  13. Arestis, Philip, et al, 2002. "The Impact of Financial Liberalization Policies on Financial Development: Evidence from Developing Economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(2), pages 109-21, April.
  14. Henry Kaiser, 1974. "An index of factorial simplicity," Psychometrika, Springer, vol. 39(1), pages 31-36, March.
  15. Asongu Simplice, 2012. "Financial development dynamic thresholds of financial globalization: evidence from Africa," Working Papers 12/020, African Governance and Development Institute..
  16. 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.
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  24. Asongu Simplice, 2011. "Why do French civil-law countries have higher levels of financial efficiency?," Working Papers 11/011, African Governance and Development Institute..
  25. Enowbi Batuo, Michael & Guidi, Francesco & Mlambo, Kupukile, 2010. "Financial Development and Income Inequality: Evidence from African Countries," MPRA Paper 25658, University Library of Munich, Germany.
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  27. Sandrine Kablan, 2009. "Banking Efficiency and Financial Development in Sub-Saharan Africa (SSA)," The African Finance Journal, Africagrowth Institute, vol. 11(2), pages 28-50.
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  31. M.R. Mulwa & A. Emrouznejad & F.M. Murithi, 2009. "Impact of liberalization on efficiency and productivity of sugar industry in Kenya," Journal of Economic Studies, Emerald Group Publishing, vol. 36(3), pages 250-264, September.
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