Monetary policy and financial development in Africa: Do governance mechanisms matter?

Abstract

Research purpose: This article examines how monetary policy instruments impact the level of financial development in 37 African countries over the period 2002-2015. The article analyses how the governance systems in these countries can have both first-and second-order effects on the level of financial development through monetary policy mechanisms.Motivation for the study: The need for the study emanates from the move toward monetary integration enshrined in the charter which culminated in the formation of the African Union. Inadequate discussion on the topic within the African continent also engineered interests in this investigation.Research approach/design and method: To deal with any endogeneity issues, we perform the estimations using the dynamic general method of moment model. Main findings:The results show that monetary policy instruments in Africa promote higher level of financial development. Also, financial development is stronger in the wake of weak governance systems. However, the interplay between effective governance and effective monetary policy has stronger positive impact on the level of financial development in Africa. Practical/managerial implications:The study calls for the institution of responsive monetary policies that harness strong institutions to promote financial development. Contribution/value-add:The article highlights the contributions of strong institutions that stimulate the contribution of monetary policy in effective financial intermediation.

Analysis of Green Financial Policy Utility: A Policy Incentive Financial Mechanism Based on State Space Model Theory Algorithm

“…The green credit referred to in this paper is proposed by He and Zhang [41], and Chen [42]: the act of banks to reallocate their lending resources to meet the environmental policies issued by the state. Highly polluting enterprises are given interest rates with penalties to discourage their emission behavior, and industries in the environmental protection field are given lower interest rates and audit thresholds to encourage their development [43].…”