Financial instability, financial openness and economic growth in african countries

Michael Batuo and Mlambo Kupukile

MPRA Paper from University Library of Munich, Germany

Abstract: In the aftermath of the recent global financial crisis, the implication of financial liberalisation for stability and economic growth has come under increasing scrutiny. One strand of literature posits a positive relationship between financial liberalisation and economic growth and development. However, others emphasise that the link between financial liberalisation is intrinsically associated with financial instability which may be harmful to economic growth and development. In this study, we offer an empirical analysis assessing the relationship between financial instability, financial liberalisation, financial development and economic growth based on a dataset of 41 African countries spanning the years 1985-2010. The results suggest that the link between financial development and liberalisation has a positive and significant effect on financial instability but the latter has a harmful effect on economic growth, which are more pronounced in the pre- financial liberalisation periods than in the post-liberalisation.

Keywords: Economic Growth; Financial Development; Financial instability; Africa (search for similar items in EconPapers)
JEL-codes: B22 C33 G01 G1 O16 O47 O55 (search for similar items in EconPapers)
Date: 2012-08
New Economics Papers: this item is included in nep-afr and nep-fdg
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:43340

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