Effects of financial development on mortgage development in Africa: an application of GMM dynamic pooled estimator

Abstract

Purpose

This study purposely re‐examine the mortgage–finance nexus in Africa.

Design/methodology/approach

This study adopted a panel data set spanning over the period 1995–2017 by using system generalized method of moments (GMM) dynamic pooled estimator developed by Arellano and Bond (1991) and Arellano and Bover (1995) involving 51 African countries.

Findings

The findings discovered that financial development (bank asset) affects mortgage development positively and this effect is highly significant while broad money supply as a measure of financial development impedes mortgage development in Africa. Furthermore, with the introduction of the quadratic term, broad money supply established a U-shaped relationship with mortgage financing indicating that more money in circulation facilitates mortgage development in Africa. However, the shape of the other variables depends largely on the nature of proxy used.

Originality/value

This study is unique in many aspects. First, examining the extant literature on the financial development and mortgage financing nexus, to the best of the authors’ knowledge, no study is cited at the African level with this relationship. Secondly is the empirical model, as it used the system GMM dynamic pooled estimator developed by Arellano and Bond (1991) and Arellano and Bover (1995) to establish whether there is any effect of finance–mortgage nexus.

Citation

Sare, Y.A., Davies, E. and Nyeadi, J.D. (2022), "Effects of financial development on mortgage development in Africa: an application of GMM dynamic pooled estimator", Journal of Financial Economic Policy, Vol. 14 No. 5, pp. 633-650. https://doi.org/10.1108/JFEP-08-2021-0206