What Drives Financial Sector Development in Africa? Insights from Machine Learning

Isaac K. Ofori, Christopher Quaidoo and Pamela E. Ofori
Authors registered in the RePEc Author Service: Isaac Kwesi Ofori

EconStor Open Access Articles and Book Chapters, 2021, issue forthcoming

Abstract: This study uses machine learning techniques to identify the key drivers of financial development in Africa. To this end, four regularization techniques— the Standard lasso, Adaptive lasso, the minimum Schwarz Bayesian information criterion lasso, and the Elasticnet are trained based on a dataset containing 86 covariates of financial development for the period 1990 – 2019. The results show that variables such as cell phones, economic globalisation, institutional effectiveness, and literacy are crucial for financial sector development in Africa. Evidence from the Partialing-out lasso instrumental variable regression reveals that while inflation and agricultural sector employment suppress financial sector development, cell phones and institutional effectiveness are remarkable in spurring financial sector development in Africa. Policy recommendations are provided in line with the rise in globalisation, and technological progress in Africa.

Keywords: Africa; Elasticnet; Financial Development; Financial Inclusion; Lasso; Regularization; Variable Selection (search for similar items in EconPapers)
JEL-codes: C01 C14 C52 C53 C55 E5 O55 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/246273/1/F ... e-Learning-Final.pdf (application/pdf)

Related works:
Working Paper: What Drives Financial Sector Development in Africa? Insights from Machine Learning (2021)
Working Paper: What Drives Financial Sector Development in Africa? Insights from Machine Learning (2021)
Working Paper: What Drives Financial Sector Development in Africa? Insights from Machine Learning (2021)
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:zbw:espost:246273

Access Statistics for this article

More articles in EconStor Open Access Articles and Book Chapters from ZBW - Leibniz Information Centre for Economics Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().