Premium
REGIONAL FINANCIAL INTEGRATION IN SUB‐SAHARAN AFRICA – AN EMPIRICAL EXAMINATION OF ITS EFFECTS ON FINANCIAL MARKET DEVELOPMENT
Author(s) -
FREY LEO,
VOLZ ULRICH
Publication year - 2013
Publication title -
south african journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.502
H-Index - 31
eISSN - 1813-6982
pISSN - 0038-2280
DOI - 10.1111/j.1813-6982.2012.01334.x
Subject(s) - context (archaeology) , finance , business , access to finance , quality (philosophy) , gross domestic product , financial system , constraint (computer aided design) , indirect finance , financial market , economics , economic growth , mechanical engineering , paleontology , philosophy , epistemology , engineering , biology
This article examines the effects of political agreements on regional financial integration ( RFI ) on financial market development and access to and cost of finance in S ub‐ S aharan A frica ( SSA ). Our results suggest that RFI positively affects financial development – measured very broadly as ratio of liquid liabilities to gross domestic product ( GDP ) – when combined with a sufficient level of institutional quality. If institutional quality is below a threshold level, RFI apparently has negative effects on financial development. However, we cannot find any significant effects of RFI on the ratio of private credit to GDP or on the efficiency of the banking sector. Regarding the effects of RFI on access to and costs of finance of enterprises in SSA , our results are mixed. We can find no significant effect of RFI on access to finance for all firms in the aggregate, but the results indicate that RFI actually impedes small firms' access to finance. Furthermore, there is a significant positive influence of foreign bank involvement on the severity of the credit constraint for small enterprises, while we do not find such an influence for large enterprises. These results provide some support for the foreign bank barrier hypothesis in the context of RFI .