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Open Access
Article
Publication date: 13 February 2023

Rexford Abaidoo and Elvis Kwame Agyapong

The study examines the effect of macroeconomic risk, inflation uncertainty and instability associated with key macroeconomic indicators on the efficiency of financial institutions…

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Abstract

Purpose

The study examines the effect of macroeconomic risk, inflation uncertainty and instability associated with key macroeconomic indicators on the efficiency of financial institutions among economies in sub-Saharan Africa (SSA).

Design/methodology/approach

Data for the empirical inquiry were compiled from 35 SSA economies from 1996 to 2019. The empirical estimates were carried out using pooled ordinary least squares (POLS) with Driscoll and Kraay’s (1998) standard errors.

Findings

Reported empirical estimates show that macroeconomic risk and exchange rate volatility constrain the efficiency of financial institutions. Further results suggest that inflation uncertainty has a significant influence on the efficiency of financial institutions among economies in the subregion. Additionally, reviewed empirical estimates show that institutional quality positively moderates the nexus between inflation uncertainty and financial institution efficiency. At the same time, political instability is found to worsen the adverse effect of macroeconomic risk on the efficiency of financial institutions.

Practical implications

For policymakers and governments, improved institutional structures are recommended to ensure the operational efficiency of financial institutions, especially during an inflationary period. For decision-makers among financial institutions, the study recommends policies that have the potential to make their institutions less vulnerable to macroeconomic risk and exchange rate fluctuations.

Originality/value

The approach adopted in this study differs significantly from related studies in that the study examines and reviews interactions and relationships not readily found in the reviewed literature.

Article
Publication date: 3 October 2023

Rexford Abaidoo and Elvis Kwame Agyapong

This study examines the extent to which regulatory policy uncertainty, macroeconomic risk, banking industry innovations, etc. influence variability in financial sector development…

Abstract

Purpose

This study examines the extent to which regulatory policy uncertainty, macroeconomic risk, banking industry innovations, etc. influence variability in financial sector development among emerging economies in sub-Sahara Africa (SSA).

Design/methodology/approach

Data for the empirical inquiry were compiled from a sample of 25 economies from the subregion from 2010 to 2020. Empirical estimates examining the relationships noted above were carried out using the two-step system generalized method of moments estimation technique.

Findings

Results the empirical estimates suggest that regulatory policy uncertainty and macroeconomic risk adversely influence or constrain financial sector development among the economies examined in the study. Banking industry innovations on the other hand is found to positively influence the development of the financial sector in these economies. Furthermore, moderating empirical analysis suggests that effective governance positively moderates the relationship between banking industry innovations and financial development among economies in the subregion.

Originality/value

This study’s approach to the mechanics of financial development among economies in SSA is designed to offer different perspectives to those found in the existing literature on financial development in three fundamental ways. First, although the verification of the role of banking industry innovations in financial development may not be new, it is important to point out that the approach used in this study is based on an index for innovations with different constituents or principal components in its construction; making the variable significantly different from what has been examined in the literature. In addition, the review of regulatory policy uncertainty and macroeconomic risk (both variables are multifaceted constructs using the principal component analysis procedure) further brings into this study’s analysis, a different approach to examining conditions influencing variability in financial development among developing economies.

Details

Journal of Financial Economic Policy, vol. 15 no. 6
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 19 June 2023

Rexford Abaidoo and Elvis Kwame Agyapong

The study evaluates the effects of governance and other regulatory structures on the development of financial institutions in the subregion of sub-Saharan Africa (SSA).

Abstract

Purpose

The study evaluates the effects of governance and other regulatory structures on the development of financial institutions in the subregion of sub-Saharan Africa (SSA).

Design/methodology/approach

Data for the analyses were compiled from relevant sources from 1996 to 2019 from a sample of 36 countries in the subregion. Empirical analyses were carried out using the Prais-Winsten panel corrected standard errors panel estimation technique augmented by pooled ordinary least squares with Driscoll and Kraay (1998) standard errors model.

Findings

Findings from the study suggest that governance and institutional quality index, as well as individual governance and regulatory variables, have positive effect on the development of financial institutions among economies in SSA. Further empirical estimates show that output growth volatility has negative moderating impact on the relationship between effective governance, control of corruption, rule of law, regulatory quality, voice and accountability, and development of financial institutions. Additionally, the results show that during periods of heightened macroeconomic risk, financial institutions could benefit from improved governance and effective regulatory structures.

Originality/value

Compared to related studies that have reviewed the discourse on financial institutions, this study rather focuses on how governance structures and institutions influence development of financial institutions instead of the impact of financial institution on the broader economy. The authors further augment this interaction by examining how the relationship in question may be moderated by macroeconomic shocks.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

Open Access
Article
Publication date: 23 June 2022

Rexford Abaidoo and Elvis Kwame Agyapong

This study examines how institutional quality influences variability in financial development among economies in Sub-Saharan Africa (SSA).

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Abstract

Purpose

This study examines how institutional quality influences variability in financial development among economies in Sub-Saharan Africa (SSA).

Design/methodology/approach

Empirical estimations verifying various relationships are performed using the limited information maximum likelihood (LIML) estimation technique.

Findings

The results suggest that institutional quality enhances the pace of financial development among economies in the sub-region all things being equal. In a further micro-level analysis where components of institutional quality index are examined separately, the study’s results suggest that effective governance, regulatory quality, rule of law and accountability tend to have a significant positive impact on financial sector development.

Research limitations/implications

Findings of the study suggest that policies geared towards improving governance and regulatory institutions can augment development of the financial sector among economies in SSA; governments and policymakers are therefore encouraged to resource noted institutions to play effective roles for the development of the financial sector.

Originality/value

Compared to related studies, this study reorients existing paradigm, which emphasizes the role of governance and institutional variables in the economic growth discourse. The authors’ empirical inquiry rather focuses on how governance and institutional structures influence regional financial development dynamics. Specifically, this study differs from most macro-level studies found in literature because it examines the impact of hitherto unexamined governance and institutional variables on financial development among economies in SSA.

Details

Journal of Economics and Development, vol. 24 no. 3
Type: Research Article
ISSN: 1859-0020

Keywords

Article
Publication date: 2 August 2022

Rexford Abaidoo and Elvis Kwame Agyapong

This paper evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa (SSA). Data…

Abstract

Purpose

This paper evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa (SSA). Data for the empirical inquiry were compiled from relevant sources for 33 countries in the subregion from 2002 to 2019. Empirical estimates verifying hypothesized relationships were carried out using the continuous updating estimator (CUE) by Hansen et al. (1996).

Design/methodology/approach

The purpose of this paper is to evaluates how institutions of governance and macroeconomic uncertainty influence efficiency of financial institutions in the subregion of Sub-Saharan Africa (SSA). Data for the empirical inquiry were compiled from relevant sources for 33 countries in the subregion from 2002 to 2019. Empirical estimates verifying hypothesized relationships were carried out using the continuous updating estimator (CUE) by Hansen et al. (1996).

Findings

The results suggest that institutional quality has significant positive effect on financial institution efficiency, supporting the view that improved and supportive structures of governance tend to promote operational efficiency among financial institutions among economies in SSA. In addition, improvement in individual governance indicators such as corruption control, government effectiveness, regulatory quality and rule of law was also found to support or enhance efficiency of financial institutions among economies in the subregion. Macroeconomic uncertainty on the other hand is found to impede efficiency of financial institutions; the same condition (macroeconomic uncertainty) is further found to negate any positive impact corruption control, government effectiveness, regulatory quality and rule of law have on operational efficiency among financial institutions in the subregion.

Originality/value

Unlike most of related studies, this study adopts a different approach on the dynamics of financial institutions. Approach pursued in this empirical inquiry examines how the regulatory environment within which financial institutions operate, the form of governance and the quality of government institutions influence efficiency of financial institutions among emerging economies in Sub-Sahara. Empirical analysis conducted examines effects of variables that are unique to this study; these variables are either constructed or econometrically derived specifically for various interactions verified in the study. For instance, institutional quality variable is an index constructed specifically for this study using principal component analysis approach.

Details

Journal of Financial Regulation and Compliance, vol. 31 no. 2
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 7 November 2016

Rexford Abaidoo and Florence Ellis

This study aims to explore potential paradigm shift in how “global economies” react to adverse macroeconomic conditions from key dominant economies such as the US and the Chinese…

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Abstract

Purpose

This study aims to explore potential paradigm shift in how “global economies” react to adverse macroeconomic conditions from key dominant economies such as the US and the Chinese economies. This is done by examining how economic activities within key economies around the world react to, or are impacted by, modeled adverse macroeconomic condition emanating from the Chinese and the US economies.

Design/methodology/approach

To verify potential paradigm shift in how external macroeconomic uncertainty impacts “global” industrial productivity and overall gross domestic product (GDP) growth within selected economies, this study opts for seemingly unrelated regression (SUR) model. Adoption of this method has been influenced by the potential for correlated error terms between modeled adverse macroeconomic condition, industrial productivity and GDP growth variables being tested in a two-equation system.

Findings

Empirical results based on SUR analysis find no evidence of this potential paradigm shift within the time frame examined in the study. Estimated results suggest that notwithstanding the recent growth surge of the Chinese economy, macroeconomic happenings within the US economy still exert significantly more influence on key economies around the world. For instance, this study finds that macroeconomic uncertainty associated with the US economy significantly constrains both industrial productivity and overall GDP growth within most of the economies tested, whereas the same condition emanating from the Chinese economy seems to rather have a weak positive impact on the same macroeconomic variables.

Research limitations/implications

Research results are strictly limited to the focus time frame for this study; it is likely that expanded data involving more years beyond what was analyzed in this study could yield different results.

Originality/value

This study is an original research based on data from a reputable US federal institution.

Details

Journal of Financial Economic Policy, vol. 8 no. 4
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 16 May 2019

Rexford Abaidoo

The purpose of this study is to empirically examine the extent to which volatility associated with corporate performance could be attributed to specific adverse macroeconomic…

Abstract

Purpose

The purpose of this study is to empirically examine the extent to which volatility associated with corporate performance could be attributed to specific adverse macroeconomic conditions in a bivariate causality analysis.

Design/methodology/approach

The study uses the Toda–Yamamoto Wald test approach to Granger causality analysis in verifying significant causal interactions if any, between corporate performance volatility and seven macroeconomic conditions or variables.

Findings

This study finds that economic policy uncertainty and macroeconomic uncertainty tend to have bidirectional causal interaction with corporate performance volatility. In addition, estimated results further suggest significant unidirectional causal interaction between corporate performance volatility and inflation expectations, exchange rate volatility, inflation and inflation uncertainty, with direction of causality running from the macroeconomic variables toward corporate performance volatility. This study, however, found no significant causal interaction between corporate performance volatility and recessionary probability or likelihood of recession.

Practical implications

This study’s conclusions could have significant and critical policy implications for key corporate policymakers responsible for corporate performance strategy. Various causal interactions identified could inform policy framework and, subsequently, strategies geared toward minimizing volatility associated with performance during episodes of any of the various macroeconomic conditions examined in this study.

Originality/value

The uniqueness of this study stems from its focus on corporate performance volatility instead of corporate performance and potential causal interactions it might have with key adverse macroeconomic conditions, some of which have not been examined in previous studies according to reviewed literature.

Details

Journal of Financial Economic Policy, vol. 11 no. 4
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 1 February 2022

Rexford Abaidoo and Elvis Kwame Agyapong

This paper examines the role price fluctuations associated with internationally traded commodities play in inflationary conditions and inflation uncertainty among economies in…

Abstract

Purpose

This paper examines the role price fluctuations associated with internationally traded commodities play in inflationary conditions and inflation uncertainty among economies in Sub-Saharan Africa.

Design/methodology/approach

Using a panel 32 countries from the sub-region from 1996 to 2019, this study employed Two-Step System Generalized Method of Moments (GMM) estimation technique in its analysis.

Findings

Empirical evidence demonstrates that fluctuations in forex-adjusted price of crude oil, gold and cocoa have significant positive impact on inflation while forex-adjusted changes in price of cotton tend to have significant negative influence on consumer price inflation among economies in the sub-region. Additionally, the study found that gold, cocoa and cotton price changes on the international market have significant positive impact on inflation uncertainty in the sub-region (rise in price leads to increase rate of inflation uncertainty). Furthermore, improved regulatory quality and growth in output growth (GDP per capita growth) were found to help in stabilizing inflation uncertainty (reduce inflation uncertainty) among economies in the sub-region during periods of persistent growth in general price levels.

Originality/value

The study present a different approach based on individual economy forex-adjusted global prices of internationally traded commodities instead of general prices often used in the literature and assessed the effects such adjusted commodity prices have on inflation and inflation uncertainty. Additionally, the moderating role of regulatory quality and output growth between surmised nexuses are also examined.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

Article
Publication date: 12 October 2021

Rexford Abaidoo, Elvis Kwame Agyapong and Kwame Fosu Boateng

This paper aims to examine the effect of volatility in prices of internationally traded commodities (the backbone of most economies) on the stability of the banking industry from…

Abstract

Purpose

This paper aims to examine the effect of volatility in prices of internationally traded commodities (the backbone of most economies) on the stability of the banking industry from three main perspectives; bank liquidity reserves, overall bank risk and bank capital adequacy.

Design/methodology/approach

Data were compiled from various sources for 30 emerging economies from 2002 to 2018 and were analyzed using the two-step system generalized method of moments estimation technique.

Findings

The study finds that all things being equal, the magnitude and direction of impact of commodity price volatility on bank stability among economies in Sub-Saharan African (SSA) depend on the type and nature of the commodity in question; and the bank stability proxy used. For instance, an increase in crude oil prices is found to foster stability in the banking industry (proxied by bank liquid reserves) but insignificant when stability in the banking industry is proxied using other banking sector parameters. Additionally, government effectiveness and corruption control have varying moderating influences on how volatility associated with prices of internationally traded commodities influence various proxies for banking industry stability.

Originality/value

This study highlights the effect of fluctuations in prices of key internationally traded commodities (adjusted for foreign exchange impact) that are important sources of revenue among economies in SSA on banking sector stability from liquidity, overall risk and capital adequacy perspectives. The influential role of governance in the relationship between volatility in the price of commodities and bank stability is also revealed by the study.

Details

Journal of Economic and Administrative Sciences, vol. 39 no. 4
Type: Research Article
ISSN: 1026-4116

Keywords

Article
Publication date: 14 March 2023

Rexford Abaidoo and Elvis Kwame Agyapong

This study examines the dynamics of financial institution development among economies in sub-Saharan Africa (SSA) and how volatility in forex-adjusted price of key globally…

Abstract

Purpose

This study examines the dynamics of financial institution development among economies in sub-Saharan Africa (SSA) and how volatility in forex-adjusted price of key globally traded, commodities and macroeconomic risk influence such development.

Design/methodology/approach

The study is based on data collected from the period starting 2001 to 2019 for relevant variables; and the empirical test was performed using the two-step system generalized method of moments (TSS-GMM) estimation method.

Findings

Empirical estimates suggest that volatility in forex-adjusted prices of crude oil and cocoa are inimical to development of financial institutions among economies in the sub-region. On the other hand, volatility in the price of gold is found to have a significant positive effect on development of financial institutions. Additionally, political instability is found to exacerbate the adverse effect of volatility in the price of globally traded commodities on the development of financial institutions in the sub-region.

Originality/value

The study verifies how volatility in forex-adjusted prices of key traded commodities on the global market influence development of financial institutions in the sub-region. Additionally, the study examines the impact of macroeconomic risk, a principal component analysis (PCA) constructed index on the development trajectory of financial institutions. Finally, the authors examine the moderating role of institutional quality and political instability in the relationship in question.

Details

International Journal of Emerging Markets, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1746-8809

Keywords

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