Understanding the Growth of African Financial Markets

41 Pages Posted: 17 Sep 2009

See all articles by Mihasonirina Andrianaivo

Mihasonirina Andrianaivo

affiliation not provided to SSRN

Charles Amo Yartey

International Monetary Fund (IMF)

Date Written: August 2009

Abstract

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.

Keywords: Africa, Banking sector, Banking systems, Banks, Bond markets, Capital markets, Corporate sector, Cross country analysis, Economic models, Investment, Political economy, Private savings, Private sector, Stock markets

Suggested Citation

Andrianaivo, Mihasonirina and Yartey, Charles Amo, Understanding the Growth of African Financial Markets (August 2009). IMF Working Paper No. 09/182, Available at SSRN: https://ssrn.com/abstract=1474590

Mihasonirina Andrianaivo

affiliation not provided to SSRN ( email )

Charles Amo Yartey (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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