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Knowledge Economy and Financial Sector Competition in African Countries

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  • Asongu, Simplice A

Abstract

The goal of this paper is to assess how knowledge economy (KE) plays out in financial sector competition. It suggests a practicable way to disentangle the effects of different components of KE on various financial sectors. The variables identified under the World Bank’s four knowledge economy index (KEI) are employed. An endogeneity robust panel instrumental variable fixed-effects estimation strategy is employed on data from 53 African countries for the period 1996-2010. The following findings are established. First, education and innovation in terms of scientific and technical publications broadly bear an inverse nexus with financial development. Second, the incidence of information and communication technologies is positive on all financial sectors but increases the non-formal sectors to the detriment of the formal sector. Third, economic incentives have positive implications for all sectors though the formal financial sector benefits most. Fourth, institutional regime is positive (negative) for the semi-formal (informal) financial sector. The findings contribute at the same time to the macroeconomic literature on measuring financial development and respond to the growing fields of informal sector importance, microfinance and mobile banking by means of KE promotion. Policy implications and future research directions are discussed.

Suggested Citation

  • Asongu, Simplice A, 2014. "Knowledge Economy and Financial Sector Competition in African Countries," MPRA Paper 57385, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:57385
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    Keywords

    Financial development; Knowledge Economy; Africa;

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O34 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Intellectual Property and Intellectual Capital
    • P00 - Economic Systems - - General - - - General
    • P48 - Economic Systems - - Other Economic Systems - - - Political Economy; Legal Institutions; Property Rights; Natural Resources; Energy; Environment; Regional Studies

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