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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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  10. Asongu, Simplice A, 2012. "Correcting inflation with financial dynamic fundamentals: which adjustments matter in Africa?," MPRA Paper 46424, University Library of Munich, Germany, revised 14 Apr 2013.
  11. Fosu, Augustin Kwasi, 2013. "Growth of African economies: Productivity, policy syndromes, and the importance of institutions," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
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  13. Simplice A, Asongu, 2012. "Financial development dynamic thresholds of financial globalization: evidence from Africa," MPRA Paper 44254, University Library of Munich, Germany.
  14. 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.
  15. Simplice A, Asongu, 2012. "How has Mobile Phone Penetration Stimulated Financial Development in Africa?," MPRA Paper 41198, University Library of Munich, Germany.
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  18. Asongu, Simplice A, 2013. "How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence," MPRA Paper 44995, University Library of Munich, Germany.
  19. Daron Acemoglu & Simon Johnson, 2005. "Unbundling Institutions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 949-995, October.
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  21. 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.
  22. 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.
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  24. 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.
  25. Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
  26. 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.
  27. 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.
  28. 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.
  29. Asongu Simplice, 2011. "Government Quality Determinants of Stock Market Performance in African Countries," Working Papers 11/019, African Governance and Development Institute..
  30. Henry Kaiser, 1974. "An index of factorial simplicity," Psychometrika, Springer, vol. 39(1), pages 31-36, March.
  31. 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.
  32. 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.
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