How Can Economic and Political Liberalisation Improve Financial Development in African Countries?

Michael Batuo and Mlambo Kupukile

MPRA Paper from University Library of Munich, Germany

Abstract: The objective of this paper is to study the interactions between economic liberalisation, political liberalisation and financial development in African countries. More specifically, we seek to establish the impact of economic, political and institutional openness on financial deepening. The empirical approach will be two-step procedure, first using a difference in difference method to show the various aspect of financial liberalisation on economic and political freedom while the second step will be using panel data techniques from period 1990 to 2005. The estimation results can be summarised as the following, first, Economic and financial liberalisation did account significantly for the financial development performance. While political stability show a positive overall effect on financial development, the association with Political freedom is consistent only after controlling the endogeneity of Political freedom on financial development. This result indicates that the transformation of the political and economic environment has improved the performance of the financial sector.

Keywords: Political Liberalisation; Economic Liberalisation; Financial Development and Africa (search for similar items in EconPapers)
JEL-codes: C21 C23 G2 O16 O17 O55 (search for similar items in EconPapers)
Date: 2009-10
New Economics Papers: this item is included in nep-afr, nep-dev and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: How can economic and political liberalisation improve financial development in African countries? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:20651

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