Governance infrastructure and indebtedness of African countries: Do regional blocs matter? |
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| Institution: | 1. Kabarak University, Private Bag 20157, Nakuru, Kenya;2. University of the Witwatersrand, PO Box 98, Johannesburg, South Africa;1. Accounting and Finance, Faculty of Business and Public Administration, University of Zaragoza, Plaza de la Constitución s/n, Huesca 22003, Spain;2. Quantitative Methods Department, Economics Faculty, University of Zaragoza, C\\ Gran Vía no. 2, Zaragoza 50018, Spain;3. Accounting and Finance, Economics Faculty, University of Zaragoza, C\\ Gran Vía no. 2, Zaragoza 50018, Spain;1. Bank of Canada, 234 Laurier Avenue West, Ottawa, ON, Canada K1A 0G9;2. Bank of Canada, Canada;3. Graduate School of Economics, Hitotsubashi University, 2-1 Naka, Kunitachi, Tokyo 186-8601, Japan;1. Department of International Business, Feng Chia University, 100 Wenhwa Rd., Seatwen, Taichung 40724, Taiwan, ROC;2. Gordon Ford College of Business, Western Kentucky University, Bowling Green, KY 42101, USA;1. Business School, Universidad Adolfo Ibanez, Santiago, Chile;2. Department of Accounting and Finance, University of Montana, Missoula, MT, 59812, United States |
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| Abstract: | Motivated by the intermediating role of good institutions in enabling growth via external debt financed investment and the touted promise of regional integration for Africa's growth prospect, we use data on 37 countries, over the period 2002–2010, to explore the governance institutions—external indebtedness nexus in Africa, at the regional bloc level. We find a robust negative relation between governance institutions and external indebtedness in East & Horn of Africa, Central Africa and Southern Africa; and unclear relationships in North and West Africa regions. Importantly, these baseline results are robust to the consideration of debt write-offs, natural resource rents, and endogeneity. Further, we find that geographic, economic and cultural factors of proximity, intra-regional activity, shared official language, legal origin and dominant religion, largely explain the commonality of Africa's regional blocs of countries. These and other results of the study can support potential external debt management strategy that leverages effective governance institutions and enhanced regional economic integration. |
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| Keywords: | External debt Governance institutions Regional integration Regional blocs Africa |
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