Financial liberalisation, Banking Crises and Economic Growth in African Countries

Michael Batuo and Kupukile Mlambo

MPRA Paper from University Library of Munich, Germany

Abstract: While financial liberalisation is considered to be good for economic growth in that it promotes the development of the financial sector, banking crises on the other hand tend to be inimical for economic growth. Moreover, banking crises tend to be preceded by financial liberalisation, as noted in a number of studies. This is because financial liberalisation tends to induce greater risk-taking behaviour by agents, thus leading to banking crises. In this paper we study the effect of financial liberalisation and banking crises on the economic performance of African countries during the period covering 1985 to 2010. Using a treatment effect, two step methods and a panel probit method, our results show that banking crises have a negative impact on economic growth meanwhile financial liberalisation tends to reduce the likelihood of banking crises in African countries.

Keywords: O16; O47; G23; O55 (search for similar items in EconPapers)
JEL-codes: N17 O16 O4 (search for similar items in EconPapers)
Date: 2012-06
New Economics Papers: this item is included in nep-afr, nep-dev and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:41524

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