Determinants of financial development in Africa: How robust is the interactive effect of trade openness and human capital?

Ibrahim, Muazu; Sare, Yakubu Awudu

doi:10.1016/j.eap.2018.09.002

Cited by 103 publications

(73 citation statements)

References 23 publications

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“…GDP per capita has a positive and significant effect on financial development in Panel B but not in Panel A. This result is broadly consistent with the work of Ibrahim and Sare (), which shows that GDP is positively correlated with financial development. Regarding trade openness, its effect on financial development is positive and statistically significant at 1 per cent in Panels A and B.…”

Section: Resultssupporting

confidence: 88%

“…Trade openness has been documented to increase financial development because higher trade openness generates new demand for external finance as firms require credit to surmount cash constraints leading to higher financial sector development (Svaleryd and Vlachos, ). Countries with higher income levels have also been documented to be associated with higher levels of financial development (Ibrahim and Sare, ).…”

Section: Methodsmentioning

confidence: 99%

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The Long‐run and Short‐run Effects of Foreign Direct Investment on Financial Development in African Countries

Njangang¹,

Luc²,

Nawo³

2019

African Development Review

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This paper contributes to the understanding of the other neglected effects of foreign direct investment (FDI) by analysing how FDI affects financial development in the short run and long run for a panel of 49 African countries over the period 1990-2016. The empirical evidence is based on a pooled mean group approach. With three panels differentiated by income level, the following findings are established: first, while there is a positive and significant long-run relationship between FDI and financial development in Africa, in the short run the effect of FDI on financial development is negative. Second, the effect of FDI is positive and significant in the long run in the three sub-samples. However, in the short run, the effect of FDI is negative and significant in lower-income countries and non-significant in lower-middle-income and uppermiddle-income countries. Overall we find strong evidence supporting the view that FDI promotes financial development in African countries in the long run. * Njangang Henri (corresponding author), The The authors are indebted to the editor and two anonymous reviewers for their useful comments and suggestions that substantially improved the quality of this paper. All remaining errors are ours.

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Section: Resultssupporting

confidence: 88%

Section: Methodsmentioning

confidence: 99%

The Long‐run and Short‐run Effects of Foreign Direct Investment on Financial Development in African Countries

Njangang¹,

Luc²,

Nawo³

2019

African Development Review

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“…1) For a recent discussion on the determinants of financial development in Africa, see Ibrahim and Sare (2018) and Ibrahim and Alagidede (2017).…”

mentioning

confidence: 99%

Networking for Foreign Direct Investment in Africa: How important are ICT Environment and Financial Sector Development?

Ibrahim

Adam

Sare

2019

Journal of Economic Integration

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Studies on the drivers of Foreign Direct Investment (FDI) in Africa have not rigorously examined whether recent advances in the continent's Information, Communication and Technology (ICT) infrastructure and financial development have any role in attracting foreign capital. This study reexamines the determinants of FDI inflows, paying special attention to the ICT and financial sector environments. By relying on a panel dataset covering 46 countries in sub-Saharan Africa over the period 1980~2016, using the generalized method of moments (GMM) method, our study shows that well-developed ICT infrastructure robustly spurs FDI regardless of the measure of ICT. On the other hand, the impact of domestic financial development on FDI is conditioned on the proxy of finance. Specifically, while domestic (private) credit to GDP inhibits (promotes) foreign capital inflows, higher levels of ICT in the environment dampen the deleterious effect of finance on FDI. We document the threshold levels of ICT necessary to exert such dampening effects.

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“…Due to the supporting evidence that financial development promotes economic growth and has interactions with several other economic and financial variables, a vast literature on the determinants of financial development has emerged. Studies investigated many potential factors as possible determinants of financial development; including inflation (Ayadi, Arbak, Naceur, and De Groen, 2015;Cherif and Dreger, 2016;Kılınc, Seven and Yetkiner, 2017), trade openness (Ruiz, 2018;Ashraf, 2018), income level (Sanfilippo-Azofra and Torre-Olmo, 2018; Tayssir and Feryel, 2018;Dutta and Sobel, 2018), human capital (Ibrahim andSare, 2018, Dutta andSobel, 2018), financial reforms (Ayadi et al, 2015), and bank development (Hamdi, 2015).…”

Section: Introductionmentioning

confidence: 99%

Analyzing the Role of Government Efficiency on Financial Development for OECD Countries

Amir

Gökmenoğlu

2020

Review of Economic Perspectives

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This paper fulfills a gap in the existing literature by analyzing the impact of government efficiency and corruption on the financial development of 31 OECD countries for the period 2002 to 2015 inclusively. To ensure robustness in our estimations, we employed several econometrics techniques, included control variables in our models, used several proxies for the variables under investigation, split the data into subgroups based on the degree of democracy, and repeated the analysis for these groups. Obtained findings provide strong evidence that government efficiency has a significant effect on financial development, and the sign of all the control variables are compatible with the a-priory theoretical expectations. The results of this study propose several policy recommendations to enhance financial development such as enhancing social cohesion through education on the use of tax contributions, revising budget procedures to ensure efficient spending of resources and to improve institutional quality, and reducing corruptive pursuits by targeting the informal economy activities and modifying the rule of law.

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Determinants of financial development in Africa: How robust is the interactive effect of trade openness and human capital?

Cited by 103 publications

References 23 publications

The Long‐run and Short‐run Effects of Foreign Direct Investment on Financial Development in African Countries

The Long‐run and Short‐run Effects of Foreign Direct Investment on Financial Development in African Countries

Networking for Foreign Direct Investment in Africa: How important are ICT Environment and Financial Sector Development?

Analyzing the Role of Government Efficiency on Financial Development for OECD Countries

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