Supply‐leading versus Demand‐following Hypothesis: Empirical Evidence from Three SSA Countries

Abstract: This study investigates empirically the direction of causality between financial development and economic growth in three sub‐Saharan African countries — Kenya, South Africa and Tanzania. The study seeks to answer one critical question: Does financial development in sub‐Saharan African countries exhibit a supply‐leading or demand‐following response? Using three proxies of financial development against real GDP per capita (a proxy for economic growth), the study finds that the direction of causality between financial development and economic growth is sensitive to the choice of measurement for financial development. In addition, the strength and clarity of the causality evidence is found to vary from country to country and over time. On balance, a demand‐following response is found to be stronger in Kenya and South Africa, whilst in Tanzania a supply‐leading response is found to be dominant. The study therefore recommends that for Kenya and South Africa the real sector of the economy should be developed further in order to sustain the development of the financial sector. However, for Tanzania, there is need for further development of the financial sector in order to make the economy more monetized.     

Financial Development,Foreign Banks and Economic Growth in Africa

This study aims to examine and analyze the impact of financial development and foreign bank penetration on African economies. An empirical study for the period 1995–2015 is conducted using the system GMM estimator. Our empirical results indicate that foreign bank entry has a positive and significant impact on economic growth in the countries of North and Southern Africa, while in the other two regions considered in this study (West and Central Africa, East Africa) the impact is negative and rarely significant. In addition, our results show that the development of financial markets has a positive and significant effect on economic growth only in the Southern African region. The paper concludes that policymakers should focus on long‐term policies to strengthen the financial sector to truly meet the needs of African people.     

Equity,Bonds, Institutional Debt and Economic Growth: Evidence from South Africa

We examine the finance‐growth nexus in South Africa accounting for the role of bond markets, stock markets, and bank and non‐bank financial intermediaries using a vector autoregressive technique. Extant empirical literature has largely accounted for only banks and stock markets, ignoring bond market and non‐bank financial intermediaries. We find that bond market development affects economic growth in South Africa, and no similar effect is observed for the bank and non‐bank financial intermediaries and the stock market. Our finding shows that examination of individual elements of the financial system is important in understanding the unique effect of each on growth. The observation that the bond market rather than stock market, bank and non‐bank institutions promote economic growth in South Africa induces an intriguing question as to what unique roles bond markets play that the intermediaries and equity market are unable to play.     

Financial Liberalization Policies and Economic Growth: Panel Data Evidence from Sub‐Saharan Africa

Abstract: The paper conducts an empirical investigation into the effects of financial liberalization policies on the growth of 19 countries in sub‐Saharan Africa (SSA). Two indexes are constructed which measure the gradual progression and institutional changes involved in financial liberalization. Because these indexes track specific financial liberalization policies, they provide better measures of financial liberalization than the indicators of financial development often used in the literature. Panel data estimates show a significant positive relationship between economic growth and financial liberalization policies. Our results are robust to alternative specifications of the model, and also across slow‐ and fast‐growing countries.     

Financial development,institutions and industrialization in sub-Saharan Africa

Using a panel data covering more than 100 countries worldwide, we have estimated a dynamic panel model to investigate the relationship between financial development and manufacturing industries’ growth. More specifically, we have estimated the effect that institutional quality might have in this relationship in sub-Saharan Africa (SSA). The results show that lower quality institutions in SSA are a hindrance to the role financial development plays in the growth of the manufacturing industrial sector, as compared with developed countries. These findings are robust when a quantile regression model is used. Furthermore, the results confirm that the relationship between per capita GDP and industrialization is nonlinear. Finally, in SSA, the abundance of natural resources has an adverse effect on the manufacturing industrial value added, providing more evidence for the Dutch disease hypothesis.     

Does financial development contribute to the achievement of the “Zero Hunger” goal in Africa?

This study examines the effects of financial development on undernourishment with panel data from 40 African countries. We show that financial development in all its dimensions reduces undernourishment. In addition, financial development, financial institutions, the financial market, and financial market depth reduce child stunting. We also identify education, health expenditure, access to electricity, and control of corruption as the main transmission channels through which financial development reduces undernourishment. These results have important implications for the achievement of the “Zero Hunger” goal in Africa and for improving child nutrition.     

Financial Development,Growth Volatility and Information Asymmetry in Sub‐Saharan Africa: Does Law Matter?

We re‐examine the law–finance theory relying on 33 countries in sub‐Saharan Africa over the period 2004–2011. Our evidence suggests that legal origin significantly explains cross‐country differences in financial development and economic volatility. More importantly, relative to civil law, English common law countries and those in Southern Africa have higher financial sector development both in terms of financial activity and banking efficiency on the back of lower volatility. While private credit bureau positively (negatively) affects financial development (economic volatility) with economically large impact for English legal legacy countries, the latter effect is contingent on the form of legal origin suggesting that, the establishment of information sharing offices per se may be insufficient in taming growth vagaries.     

Understanding the Growth of African Financial Markets*

Abstract: This paper examines empirically the determinants of financial market development in Africa with an emphasis on banking systems and stock markets. The results show that income level, creditor rights protection, financial repression, and political risk are the main determinants of banking sector development in Africa, and that stock market liquidity, domestic savings, banking sector development, and political risk are the main determinants of stock market development. We also find that liberalizing the capital account promotes financial market development only in countries with high incomes, well‐developed institutions, or both. The powerful impacts of political risk on both banking sector and stock market development suggest that resolution of political risk may be important to the development of African financial markets.     

Financial Development,Capital Accumulation and Productivity Improvement: Evidence from China

Financial sector development may contribute to economic growth by facilitating capital accumulation and by improving productivity. This article investigates empirically the contribution that financial development may make to these two alternative drivers of economic growth in China using annual data for the period 1952 to 2005. Using cointegration and Granger-causality testing we examine the relationship between financial development and, respectively, capital accumulation and productivity in a time-series vector autoregression (VAR) framework. The substantive findings are that there is either bi-directional Granger causality between financial development and capital accumulation or that Granger causality runs from capital accumulation to financial development, depending on how capital accumulation and financial development are measured. The link between financial development and productivity is found to be statistically weak.     

Building Complementarities in Africa between Different Development Cooperation Modalities of Traditional Development Partners and China

Abstract: China's relationship with Africa has grown exponentially over the last decade with US$95 billion in bilateral trade in 2008 and US$5.4 billion of Chinese investment in Africa for the same year. The growth of Sino‐African relations also has an impact on the role of traditional development partners in Africa in particular in the aftermath of the 2008 financial crisis, which has already led some traditional development partners to reduce their aid budgets and subsequently their Official Development Assistance (ODA) flows to Africa. The objective of this paper is to analyse different development cooperation modalities in Africa of traditional development partners and China. This requires identifying trends in aid, debt relief, general budget support, trade, preferential trade access, and investment flows of both traditional development partners and China. The paper advocates that complementarities can be built between these development modalities on a national, regional and global level. This would enhance development effectiveness, increase efficiency and create win‐win situations which would be beneficial to African countries, China and traditional development partners.     

Macroeconomic Volatility, Trade and Financial Liberalization in Africa

This paper examines the effects of financial and trade liberalization on growth volatility of real output and consumption in Africa. Our results suggest trade liberalization is associated with greater output and consumption growth volatility while financial liberalization increases the efficacy of consumption smoothing and stabilizes income and consumption growth. In addition, we find financial market depth and institutional quality operate jointly with trade and financial openness to reduce volatility in output and consumption growth. There is also evidence that good institutions which foster low inflation levels and volatility promote consumption and output growth stability.     

Law and Finance Revisited: Evidence from African Countries

The law and finance theory essentially states that legal origins are a significant determinant of financial development. The conclusion from the law and finance theory is that countries whose legal traditions derived from British Common Law have better developed financial markets than countries following French Civil Law. This study conducted an empirical investigation of the law and finance theory for African countries. Our empirical results showed that legal origins are insignificant in explaining financial development but rather, legal effectiveness significantly explains cross‐country differences in financial development in Africa. We concluded that the law and finance theory does not hold in African countries.     

REGIONAL INTEGRATION OF EQUITY MARKETS IN SUB-SAHARAN AFRICA

Equity markets in developing and emerging economies have grown in number and importance as a result of financial market globalisation. However, their role in economic growth and development is enhanced if nascent markets are integrated with well‐established ones. Market integration, measured by the transmission of returns volatility, is identified across a sample of SSA countries, using a unique dataset. Evidence for potential integration between financial markets in Sub‐Saharan Africa (SSA) is found. Spillovers are found across markets, some unidirectional and others bi‐directional. However, continued illiquidity and incomplete institutions indicate that an integrated financial community remains premature, and considerable regulatory reform and harmonisation will be necessary for this to succeed.     

金融发展与经济增长:基于两部门模型的中国实证研究

有关金融发展与经济增长关系的研究越来越深入,本文的研究侧重于金融发展与经济增长关系的微观经济基础和关联机制,通过两部门模型揭示金融发展影响经济增长的两个方式：外部性和边际生产力差异。中国的实证检验结果表明,以M2为测度指标的金融发展与经济长期增长存在显著的正向关系,并且金融发展是经济增长的Granger原因。     

Re‐Visiting Financial Development and Economic Growth Nexus: The Role of Capitalization in Bangladesh

This paper revisits the relationship between financial development and economic growth in Bangladesh by incorporating trade openness in production function using quarter frequency data over the period of 1976‐2012. We applied combined Bayer–Hanck cointegration approach to examine cointegration among the series. Our empirical evidence suggests that development of financial sector facilitates economic growth but capitalization impedes it. In addition, trade openness stimulates economic growth. Labour is also positively linked to economic growth. The vector error correction model Granger causality results divulge that financial development causes real per capita gross domestic product (GDP) growth, and resultantly, real per capita GDP growth causes financial development in a Granger sense. The results also show that trade and labour Granger cause economic growth. The findings of the paper provide insights for policymakers to use financial development and trade openness as a tool for sustained economic growth in the long run. The paper also suggests policymakers to utilise capitalization in a way that is beneficial for economic growth of Bangladesh.     

Liberalisation and Financial Sector Competition: A Critical Contribution to the Empirics with an African Assessment

This paper investigates how financial, trade, institutional and political liberalisation policies have affected financial sector competition in Africa using updated data to appraise second‐generation reforms. The “freedom to trade” and “economic freedom” indices are employed. Hitherto, unexplored financial sector concepts of formalisation, semi‐formalisation, informalisation and non‐formalisation are also introduced. The following findings are established. First, relative to money supply, (i) with the exception of the economic freedom mechanism, liberalisation policies have generally decreased the growth of the formal financial sector to the benefit of other financial sectors; (ii) apart from the foreign direct investment and economic freedom channels, liberalisation policies have been fruitful for semi‐formal financial development at the cost of other financial sectors and; (iii) with the exception of economic freedom, both the informal and non‐formal sectors have developed owing to liberalisation to the detriment of the formal financial sector. Second, relative to gross domestic product, the semi‐formal, informal and/or non‐formal financial sectors have also generally improved as a result of liberalisation. Policy implications are discussed.     

Economic bargaining power and financial decision-making among married and cohabitant women in South Africa

Women’s economic empowerment remains an important global policy issue and their involvement in household decision-making is critical for development. This paper aims to elucidate a key feature of bargaining models of intra-household decision-making, namely the dynamics between women’s economic bargaining power and their financial decision-making power. The paper also documents trends and transitions in financial decision-making. Using balanced panel data from South Africa’s National Income Dynamics Study (NIDS), the analysis finds that women who are married or living together remain economically disadvantaged compared to their male counterparts. Although gaining ground in terms of financial decision-making responsibility, women also remain disadvantaged compared to men in terms of financial decision-making power. Yet, employment opportunities significantly enhances women’s role in financial decision-making, thus arguing a case for continued efforts at women’s economic empowerment.     

四川农村正规金融发展与农民收入增长关系研究——基于灰色关联度分析

本文选取了四川省1999～2009年的统计数据,运用灰色关联度分析方法对农村正规金融发展与农民收入增长之间的关联度进行了分析,由此得出结论:农村正规金融的发展对农民人均纯收入的增长有明显的影响,其中农村金融发展效率的提高对农民收入增长的促进作用最大,满足农民的信贷资金需求是金融支持农民增收的主要途径。     

区域金融发展与经济增长关系的实证研究——以新疆为例

金融发展与经济增长的关系一直以来都是理论界所探讨的焦点,虽然不同的学者因为研究的层面和所选取的数据以及计量方法差异得出了不同的结论,但大多数研究者都一致认为金融发展与经济增长存在严格的正相关关系。然而,新疆金融的发展在一定的程度上抑制新疆经济的增长,因此研究新疆区域金融发展和经济增长的理论具有较强的现实意义。本文就以新疆为例,通过运用计量经济学方法对新疆区域金融发展与经济增长的关系进行实证分析。     

金融中介、股票市场与经济增长:基于联立方程模型的实证分析

文章利用1998～2009年的季度数据,通过构建联立方程模型,利用GMM估计方法系统考察了中国金融中介、股票市场与经济增长之间的相互关系.实证研究结果表明:金融中介发展与经济增长二者相互影响,但作用方向不同:金融中介的总体规模对经济发展的影响为负;经济增长对于金融中介的发展存在显著的正向作用;股票市场发展与经济增长二者...