Does democracy foster financial development? An empirical analysis

Yang, Benhua

doi:10.1016/j.econlet.2011.05.012

“…In accordance with the democracy-finance (growth) literature (Narayan et al, 2011;Yang, 2011), we measure political regimes with indicators of "Polity" and "Democracy" from the ADI of the WB. The Polity measure has been widely used in political science research and discloses the state's level of democracy (about 89%: see Appendix 2) based on an evaluation of competitiveness, openness and level of participation at elections.…”

Section: Independent Variablesmentioning

confidence: 99%

Finance and Democracy in Africa

Asongu

¹

2011

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractThis paper focuses on how political regimes affect financial development in Africa, contingent on religious-domination, income-levels and colonial-legacies. The main findings are summarized as follows. Authoritarian regimes have a higher propensity to effect policies that favour the development of financial intermediary depth, activity and size. Democracy has important effects on the degree of competition for public offices but less significant effects in comparison with autocracy on policies towards financial development. As a policy implication, once democracy is initiated, it should be accelerated (to edge the appeals of authoritarian regimes) and reap the benefits of level and time hypotheses in financial development.

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“…Broadly, the results in Table 1 indicate that distinguishing African countries by income-levels, religious-dominations and legal-origins helps explain cross-country differences in financial development. These findings have been documented by an extensive literature (La Porta et al, 1997;Stulz & Williamson, 2003;Beck et al, 2003) and much recently confirmed in the law-finance literature (Asongu, 2011ab;Yang, 2011). Even upon controlling for trade, public investment and population growth, the instruments enter jointly significantly in all regressions at a 1% significance level.…”

Section: Finance and Instrumentsmentioning

confidence: 53%

“…(La Porta et al, 1997Porta et al, ,1998Stulz & Williamson, 2003;Beck et al, 2003;Asongu, 2011ab;Yang, 2011).…”

Section: Instrumental Variablesmentioning

confidence: 99%

“…We control for population growth, openness(trade) and public investment (Asongu, 2011c;Yang, 2011) in the regressions. It is imperative to note that the strength of the instruments is contingent on these variables; as in the first-stage of the Instrumental Variable(IV) estimation procedure, the instruments must be exogenous to the endogenous components of the independent variables, conditional on other covariates(control variables).…”

Section: Dependent and Control Variablesmentioning

confidence: 99%

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Financial Determinants of Consumer Price Inflation. What Do Dynamics in Money, Credit, Efficiency and Size Tell Us?

Asongu

¹

2012

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in January 2012Abstract Purpose -The purpose of this paper is to examine the effects of financial dynamic policy options in money, credit, efficiency and size on consumer prices. Soaring food prices have marked the geopolitical landscape of developing countries in the past few years.Design/methodology/approach -The estimation approach used is a Two-Stage-Least Squares Instrumental Variable technique. Instruments include: legal-origins; income-levels and religiousdominations. The first-step consists of justifying the choice of the estimation approach with a Hausman-test for endogeneity. In the second-step, we verify that the instrumental variables are exogenous to the endogenous components of explaining variables(financial dynamic channels) conditional on other covariates(control variables). In the third-step, the validity of the instruments is examined with the Sargan overidentifying restrictions test. Robustness checks are ensured by: (1) use of alternative indicators of each financial dynamic; (2) estimation with robust Heteroscedasticity and Autocorrelation Consistent (HAC) standard errors; and (3) adoption of two interchangeable sets of instruments.Findings -Findings broadly reveal the following: (1) money(depth) and credit(activity) which are in absolute measures have positive elasticities of inflation; while (2) financial efficiency and size in relative measures have negative elasticities of inflation.Social implications -This paper helps in providing monetary policy options in the fight against soaring consumer prices. By keeping inflationary pressures on food prices in check, sustained campaigns involving strikes, demonstrations, marches, rallies and political crises that seriously disrupt economic performance could be mitigated.Originality/value -As far as we have perused, there is yet no study that assesses monetary policy options that could be relevant in addressing the dramatic surge in the price of consumer commodities.

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“…Third, democratic transitions are typically preceded by low financial development. Mulligan et al (2004) and Yang (2011) find that democracies have unimportant effects on public policies. For instance, in many poor countries, the security of property and economic development came from policy choices made by dictators.…”

Section: Introductionmentioning

confidence: 99%

Institutions and development in MENA region: evidence from the manufacturing sector

Arayssi

¹

,

Fakih

²

2015

International Journal of Social Economics

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.IZA Discussion Paper No. 8772 January 2015 ABSTRACT Institutions and Development in MENA Region: Evidence from the Manufacturing SectorThis paper examines the role of institutions (including civil law origin), financial deepening and degree of regime authority on growth rates in the Middle East and North Africa (MENA) region using panel data through a fixed effect model. The results reveal that English civil law origin and the establishment of the rule of law work with the development of financial institutions to increase economic growth in these economies; however, the democratization of the political institutions and foreign direct investment do not assist financial development in promoting economic growth. The findings emphasize the prominence of overcoming institutional weaknesses and establishing transparent public policy governing businesses as a pre-requisite for successful universal integration in developing countries.JEL Classification: G2, O16, P48

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Does democracy foster financial development? An empirical analysis

Cited by 58 publications

References 13 publications

Finance and Democracy in Africa

Finance and Democracy in Africa

Financial Determinants of Consumer Price Inflation. What Do Dynamics in Money, Credit, Efficiency and Size Tell Us?

Institutions and development in MENA region: evidence from the manufacturing sector

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