On the Determinant of Financial Development in Africa: Geography, Institutions and Macroeconomic Policy Relevance

Ibrahim Adekunle (), Olumuyiwa Yinusa (), Tolulope Williams () and Rahmon Folami
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Ibrahim Adekunle: Babcock University, Nigeria
Olumuyiwa Yinusa: Olabisi Onabanjo University, Ago-Iwoye, Nigeria
Tolulope Williams: Olabisi Onabanjo University, Ogun State, Nigeria

No 21/054, Working Papers from European Xtramile Centre of African Studies (EXCAS)

Abstract: While it is clear that financial depth and economic diversity are prerequisites for the realisation of growth and development objectives, heterogeneous factors that determines financial development remains imperfectly understood. This ambiguity in the structural relations between varied causative factors is more pronounced in Africa where conditions for growth and development remains inadequately met. Underexplored aspects such as geographic, political, economic and macroeconomic policy determinant of financial development in Africa could have culminated into the misalignment of the continent financialisation strategies. This paper takes the lead, diverse and holistic approach to assign numerical weights to these unobserved factors to reach conclusions that can redefine policy and research on Africa's financialisation objectives. We compared result along with the mean group (MG), common correlated effect mean group (CCEMG) and Augmented Mean Group (AMG) estimators but relied on the AMG results because of its high precision, relevance and superiority in addressing core issues of cross-sectional dependence and slope homogeneity of regressors.Based on the AMG results, we found geographic, economic and macroeconomic policy factors to lead to financial development in Africa. However, our political/institutional composite index inversely relate to financial development in Africa. This counter-intuitive outcome could be due to Africa, age-long weak institutional capacities. Policy implications were discussed.

Keywords: Financial Development; Geography; Institutions; Macroeconomic Policy; Africa (search for similar items in EconPapers)
JEL-codes: D02 G20 P34 Q56 (search for similar items in EconPapers)
Pages: 36
Date: 2021-01
New Economics Papers: this item is included in nep-cfn, nep-isf and nep-mac
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Forthcoming in Journal of Sustainable Finance and Investment

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http://publications.excas.org/RePEc/exs/exs-wpaper ... opment-in-Africa.pdf Revised version, 2021 (application/pdf)

Related works:
Working Paper: On the Determinant of Financial Development in Africa: Geography, Institutions and Macroeconomic Policy Relevance (2021)
Working Paper: On the Determinant of Financial Development in Africa: Geography, Institutions and Macroeconomic Policy Relevance (2021)
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