Economics at your fingertips  

Financial Innovation and Sustainable Development in Selected Countries in West Africa

Folorunsho Ajide ()

Articles, 2016, vol. 12, issue 3, 85-111

Abstract: Financial innovation has given a new trend to modern financial system and its importance has been widely recognized. This study investigated the effect of financial innovation augmented with bank competition on sustainable development in eight West African countries. Data were sourced from World Bank development indicators from years 2000-2013. We used two proxies of competitions, two proxies of financial innovations and regressed them on a growth indicator as well as development indicator with other control variables. Using panel data estimations, our results confirmed that an increase in banking efficiency driven by competition and financial innovation would improve economic growth and development. While the two proxies of competition were significant, the financial innovations were not significant; one displayed a negative, while the other exhibited a positive relationship with development. These results revealed the differential effects of different financial innovations adopted in the financial system. That is, the growth effect of financial innovation is sensitive to the choice of proxy. A reduction in demand for money caused by financial innovations could deter economic growth and development. This is because individuals would move away from more liquid assets to less liquid assets. On the other hand, financial innovations could potentially lead to an increase in money demand if payment systems improve and individual’s demand for more liquid assets is channeled to productive sectors. We therefore concluded that policies which would drive competition and efficiency in the banking industry as well as financial innovation should be introduced to ensure effective functioning of the financial system.

Keywords: financial innovation; competition; development; Africa (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) ... e3_2016_Article4.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.7341/20161234

Access Statistics for this article

More articles in Articles from Fundacja Upowszechniająca Wiedzę i Naukę "Cognitione"
Bibliographic data for series maintained by Anna Ujwary-Gil ().

Page updated 2019-03-31
Handle: RePEc:aae:journl:v:12:y:2016:i:3:p:85-111