African Financial Development Dynamics: Big Time Convergence
African Journal of Economics and Management Studies, 5(2), pp. 160-194 (2014).
47 Pages Posted: 10 Sep 2014 Last revised: 1 Apr 2015
Date Written: January 8, 2012
Abstract
Purpose - Assessment of African financial development dynamic convergences in money, credit, efficiency and size.
Design/Methodology - The empirical evidence is premised on 11 homogenous panels based on regions (Sub-Saharan and North Africa), income-levels (low, middle, lower-middle and upper-middle), legal-origins (English common-law and French civil-law) and religious dominations (Christianity and Islam). We examine convergence in financial intermediary dynamics of depth, efficiency, activity and size.
Findings - Findings suggest that countries with small-sized financial intermediary depth, efficiency, activity and size are catching-up countries with large-sized financial intermediary depth, efficiency, activity and size respectively. We also provide the speeds of convergence and time necessary to achieve a full (100%) convergence.
Practical Implications - The presence of strong links among African banking sectors may present little opportunity for portfolio diversification. The convergence patterns show positive steps towards regional integration. As a policy implication, African governments should not relent in structural and institutional reforms.
Originality/Value - It is the first critical assessment of convergence in financial intermediary development dynamics in the African continent.
Keywords: Convergence; Policy Coordination; Banking; Africa
JEL Classification: F15; F36; F42; O55; P52
Suggested Citation: Suggested Citation