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On the substitution of institutions and finance in investment

The Ali (2013, EB) findings on the nexuses among institutions, finance and investment could have an important influence on policy and academic debates. This paper relaxes his hypotheses on the conception, definition and measurement of finance and institutions because they are less realistic to developing countries to which the resulting policy implications are destined. We dissect with great acuteness the contextual underpinnings of financial development dynamics and elucidate why the Acemoglu & Johnson (2005) justification provided for the measurement of property rights institutions (PRI) is lacking in substance. Using updated data (1996-2010) from 53 African countries, we provide more robust evidence on the substitution of institutions and finance in investment. Results under many baseline and augmented scenarios are not consistent with the underlying paper. Justifications for the differences in findings are discussed. As a policy implication, the Ali (2013, EB) findings for countries with poor financial systems may not be relevant for Africa.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 56814.

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Date of creation: 04 Jan 2014
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Handle: RePEc:pra:mprapa:56814
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  9. Augustin Kwasi Fosu, 2012. "Growth of African Economies: Productivity, Policy Syndromes and the Importance of Institutions," Economics Series Working Papers WPS/2012-11, University of Oxford, Department of Economics.
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  11. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  12. Abdi Ali, 2013. "Are property rights institutions and financial development complements or substitutes? The case of private investment," Economics Bulletin, AccessEcon, vol. 33(2), pages 1126-1131.
  13. Simplice A, Asongu, 2012. "Globalization, (fighting) corruption and development: how are these phenomena linearly and nonlinearly related in wealth effects?," MPRA Paper 36899, University Library of Munich, Germany.
  14. Simplice A, Asongu, 2012. "How has Mobile Phone Penetration Stimulated Financial Development in Africa?," MPRA Paper 41198, University Library of Munich, Germany.
  15. Antonio Andrés & Simplice Asongu, 2013. "Fighting Software Piracy: Which Governance Tools Matter in Africa?," Journal of Business Ethics, Springer, vol. 118(3), pages 667-682, December.
  16. Asongu, Simplice A, 2013. "Inequality, poverty and quality of institutions: which freedom channels of globalization matter for Africa?," MPRA Paper 46929, University Library of Munich, Germany.
  17. Asongu, Simplice A, 2013. "How do financial reforms affect inequality through financial sector competition? Evidence from Africa," MPRA Paper 44410, University Library of Munich, Germany.
  18. 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.
  19. Michael Enowbi-Batuo & Mlambo Kupukile, 2010. "How can economic and political liberalisation improve financial development in African countries?," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 2(1), pages 35-59, May.
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  21. Simplice A., Simplice, 2011. "Why do French civil-law countries have higher levels of financial efficiency?," MPRA Paper 33950, University Library of Munich, Germany.
  22. Magnus Saxegaard, 2006. "Excess Liquidity and Effectiveness of Monetary Policy; Evidence from Sub-Saharan Africa," IMF Working Papers 06/115, International Monetary Fund.
  23. Lalountas, Dionisios A. & Manolas, George A. & Vavouras, Ioannis S., 2011. "Corruption, globalization and development: How are these three phenomena related?," Journal of Policy Modeling, Elsevier, vol. 33(4), pages 636-648, July.
  24. Asongu Simplice, 2011. "Government Quality Determinants of Stock Market Performance in African Countries," Working Papers 11/019, African Governance and Development Institute..
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  27. Enowbi Batuo, Michael & Asongu, Simplice A., 2012. "The impact of liberalisation policies on income inequality in african countries," MPRA Paper 43344, University Library of Munich, Germany.
  28. Simplice A Asongu, 2013. "A Short-run Schumpeterian Trip to Embryonic African Monetary Zones," Economics Bulletin, AccessEcon, vol. 33(1), pages 859-873.
  29. Augustin Kwasi Fosu, 2013. "Institutions and African Economies: An Overview," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(4), pages 491-498, August.
  30. Simplice Asongu, 2014. "Financial development dynamic thresholds of financial globalization: Evidence from Africa," Journal of Economic Studies, Emerald Group Publishing, vol. 41(2), pages 166 - 195, March.
  31. 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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