The Comparative African Regional Economics of Globalization in Financial Allocation Efficiency

African Governance and Development Institute WP/15/053

40 Pages Posted: 9 Jan 2016

See all articles by Simplice Asongu

Simplice Asongu

African Governance and Development Institute

Vanessa S. Tchamyou

African Governance and Development Institute

Date Written: December 31, 2015

Abstract

The study assesses the role of globalization-fuelled regionalization policies on financial allocation efficiency in four economic and monetary regions in Africa for the period 1980 to 2008. Banking system and financial system efficiencies are used as dependent variables whereas seven bundled and unbundled globalization variables are employed as independent indicators. The bundling exercise is achieved by means of principal component analysis while the empirical evidence is based on interactive Fixed Effects regressions. The following findings are established. First, financial allocation efficiency is more sensitive to financial openness compared to trade openness and most sensitive to globalization. The relationship between allocation efficiency and globalization-fuelled regionalization policies is: (i) Kuznets or inverted U-shape in the UEMOA and CEMAC zones (evidence of decreasing returns to allocation efficiency from globalization-fuelled regionalization) and (ii) U-shape overwhelmingly in the COMESA and scantily in the EAC (increasing returns to allocation efficiency from globalization-fuelled regionalization). Established shapes are relevant to specific globalization dynamics within regions. ‘Economic and monetary’ regions are more prone to surplus liquidity than purely economic regions. Policy implications and measures of fighting surplus liquidity are discussed.

Keywords: Globalization, Financial Development, Regional Integration, Panel, Africa

JEL Classification: A10, D60, E40, O10, P50

Suggested Citation

Asongu, Simplice and S. Tchamyou, Vanessa, The Comparative African Regional Economics of Globalization in Financial Allocation Efficiency (December 31, 2015). African Governance and Development Institute WP/15/053. Available at SSRN: https://ssrn.com/abstract=2713130 or http://dx.doi.org/10.2139/ssrn.2713130

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

Vanessa S. Tchamyou

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

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