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How can economic and political liberalisation improve financial development in African countries?

Michael Enowbi‐Batuo (Facoltà di Economia “Giorgio Fuà”, Università Politecnica delle Marche, Ancona, Italy)
Mlambo Kupukile (African Development Bank, Tunis, Tunisia)

Journal of Financial Economic Policy

ISSN: 1757-6385

Article publication date: 20 April 2010

89

Abstract

Purpose

The objective of this paper is to study the interactions between economic liberalisation, political liberalisation, and financial development in African countries. More specifically, the paper seeks to establish the impact of economic, political, and institutional openness on financial deepening.

Design/methodology/approach

In the empirical part, the paper proposes a two‐step procedure which involves the treatment effect and the new panel studies technique of recently updated data for economic and political reform.

Findings

The results show to what extent political liberalisation, economic liberalisation, and the stability of the political system have a statistically significant effect on the financial development of the continent, showing that reform, stability, and democratic rule seem to be favourable for development of the financial sector in the continent.

Originality/value

There are few studies that directly explore the link between political and economic liberalisation on financial development. The difference between this paper and other studies is that first, it is restricted to African countries, those that have been mostly undergoing the two types of reform (political and economics). The second reason is that most of the previous papers always took into consideration the effects of financial development on one of the reforms either political or economic, meanwhile in this paper, the author considers the various aspects of reform: political, economical, and the stability of the environment.

Keywords

Citation

Enowbi‐Batuo, M. and Kupukile, M. (2010), "How can economic and political liberalisation improve financial development in African countries?", Journal of Financial Economic Policy, Vol. 2 No. 1, pp. 35-59. https://doi.org/10.1108/17576381011055334

Publisher

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Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

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