Financial openness, financial sector development, and income inequality: With an extensive set of pull and push factors

Biruk Ashenafi and Yan Dong

African Development Review, 2023, vol. 35, issue 2, 138-151

Abstract: This paper investigates the impact of financial openness on financial sector development and income inequality. We use the de jure and de facto measures of financial openness across 78 countries from 1980 to 2019. By employing a system generalized method of moments (GMM) with 5‐year averaged data and a novel push and pull modeling framework, we obtain three key results. First, the de jure measure of financial openness exacerbates income inequality and is sensitive to banking crises and conflict intensity. Second, the de facto measure spurs stock value traded in emerging market economies (EMEs) and declines domestic credit in Africa. Third, the interaction between de facto measures with schooling and governance factors affects financial sector development and income inequality. We highlighted that the mere usage of the de jure measure and their interaction is incorrect. The key implication is that valuable information about the real impact of openness can be obtained from the de facto measures and their interaction with favorable macroeconomic fundamentals, governance factors, and adverse nonpolicy factors.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://doi.org/10.1111/1467-8268.12700

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: https://EconPapers.repec.org/RePEc:bla:afrdev:v:35:y:2023:i:2:p:138-151

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=1017-6772

Access Statistics for this article

African Development Review is currently edited by John C. Anyanwu, Hassan Aly and Kupukile Mlambo

More articles in African Development Review from African Development Bank Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().