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Understanding the Growth of African Financial Markets *
Author(s) -
Andrianaivo Mihasonirina,
Yartey Charles Amo
Publication year - 2010
Publication title -
african development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.654
H-Index - 32
eISSN - 1467-8268
pISSN - 1017-6772
DOI - 10.1111/j.1467-8268.2010.00253.x
Subject(s) - financial repression , stock market , financial system , capital market , market liquidity , political risk , creditor , economics , politics , financial market , stock (firearms) , business , finance , interest rate , debt , mechanical engineering , paleontology , horse , political science , law , biology , engineering
: This paper examines empirically the determinants of financial market development in Africa with an emphasis on banking systems and stock markets. The results show that income level, creditor rights protection, financial repression, and political risk are the main determinants of banking sector development in Africa, and that stock market liquidity, domestic savings, banking sector development, and political risk are the main determinants of stock market development. We also find that liberalizing the capital account promotes financial market development only in countries with high incomes, well‐developed institutions, or both. The powerful impacts of political risk on both banking sector and stock market development suggest that resolution of political risk may be important to the development of African financial markets.