Financial liberalisation, financial development and financial crises in SADC countries

Clement Moyo and Pierre Le Roux ()
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Pierre Le Roux: Department of Economics, Nelson Mandela University

No 1835, Working Papers from Department of Economics, Nelson Mandela University

Abstract: The issue of financial reforms and financial development has received considerable attention over the recent past. A number of recent studies conclude that financial development may hinder economic growth. Therefore, to shed light on this negative relationship, this study investigates whether financial liberalisation and financial development increase the likelihood financial crises in SADC countries. The logit model is employed for the analysis using data for the period 1990 to 2015. The results showed that financial liberalisation captured by real interest rates and capital account openness reduces the likelihood of financial crises. On the other hand, financial development represented by bank credit, increases the incidence of financial crises. Therefore, financial liberalisation may increase the likelihood of financial crises indirectly through financial development. The study recommends that a sound regulatory and supervisory framework be established as well as institutional quality raised to curb the effect of financial development on the incidence of financial crises.

Keywords: Financial liberalisation; financial crises; financial development; logit model. (search for similar items in EconPapers)
JEL-codes: C23 E60 G01 G21 G28 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2018-11, Revised 2018-11
New Economics Papers: this item is included in nep-acc, nep-cfn and nep-mac
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Journal Article: Financial liberalisation, financial development and financial crises in SADC countries (2020)
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