IDEAS home Printed from https://ideas.repec.org/a/aic/saebjn/v70y2023i1p83-96n8.html
   My bibliography  Save this article

Effects of International Financial Integration on Economic Growth in Developing Countries: Heterogeneous Panel Evidence from Seven West African Countries

Author

Listed:
  • Lamissa Barro

    (University of Dédougou, Dédougou, Burkina Faso)

  • Boubié Toussaint Bassolet

    (Thomas Sankara University, Ouagadougou, Burkina Faso)

Abstract

From the existing literature, there is no consensus on the effects of financial integration on economic growth. The studies have mostly focused on country samples without taking into account country heterogeneity, or have been limited to a causality study. This paper examines the effects of international financial integration on economic growth in seven West African Economic and Monetary Union’s countries (WAEMU)[i], over the period 1980 - 2019. Methodologically, the study applies heterogeneous panel techniques taking into account inter-individual dependence (MG, CCEMG and AMG). The results show that the stock of external debt and the opening of the capital account negatively affect long-term economic growth in the WAEMU region. The country analysis confirms the panel results for Benin, Burkina Faso and Mali. Sectoral misallocation of external capital could be a plausible explanation. The economies of WAEMU countries are mostly dominated by the service sector, which contributes more to their GDP than the productive sectors, i.e. agriculture and industry. While the agricultural sector, which employs a large part of the active population, is still traditional and does not benefit from capital inflows, the industrial sector is still embryonic.

Suggested Citation

  • Lamissa Barro & Boubié Toussaint Bassolet, 2023. "Effects of International Financial Integration on Economic Growth in Developing Countries: Heterogeneous Panel Evidence from Seven West African Countries," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 70(1), pages 83-96, March.
    • Handle: RePEc:aic:saebjn:v:70:y:2023:i:1:p:83-96:n:8
    as

    Download full text from publisher

    File URL: http://saeb.feaa.uaic.ro/index.php/saeb/article/view/1603
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Barro, Robert J & Mankiw, N Gregory & Sala-i-Martin, Xavier, 1995. "Capital Mobility in Neoclassical Models of Growth," American Economic Review, American Economic Association, vol. 85(1), pages 103-115, March.
    2. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
    3. M. Hashem Pesaran, 2006. "Estimation and Inference in Large Heterogeneous Panels with a Multifactor Error Structure," Econometrica, Econometric Society, vol. 74(4), pages 967-1012, July.
    4. Mr. Ayhan Kose & Mr. Kenneth Rogoff & Mr. Eswar S Prasad & Shang-Jin Wei, 2003. "Effects of Financial Globalization on Developing Countries: Some Empirical Evidence," IMF Occasional Papers 2003/007, International Monetary Fund.
    5. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    6. Roseline Nyakerario Misati & Clement Ighodaro & Maureen Were & John Omiti, 2015. "Financial Integration and Economic Growth in the COMESA and SADC Regions," Journal of African Business, Taylor & Francis Journals, vol. 16(1-2), pages 109-127, January.
    7. Quinn, Dennis, 1997. "The Correlates of Change in International Financial Regulation," American Political Science Review, Cambridge University Press, vol. 91(3), pages 531-551, September.
    8. Saafi, Sami & Bel Haj Mohamed, Meriem & Ben Doudou, Makram, 2016. "Causal Nexus between Financial Integration and Economic Growth : Does Nonlinearity Matter?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 31(4), pages 817-854.
    9. M. Hashem Pesaran, 2021. "General diagnostic tests for cross-sectional dependence in panels," Empirical Economics, Springer, vol. 60(1), pages 13-50, January.
    10. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    11. Graciela Laura Kaminsky & Sergio L. Schmukler, 2008. "Short-Run Pain, Long-Run Gain: Financial Liberalization and Stock Market Cycles," Review of Finance, European Finance Association, vol. 12(2), pages 253-292.
    12. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hodelin, Reynaldo Senra, 2022. "Statistical disclosure and economic growth: What is the nexus?," World Development, Elsevier, vol. 160(C).
    2. Mushtaq Ahmad Malik & Tariq Masood, 2022. "Dynamics of Output Growth and Convergence in the Middle East and North African Countries: Heterogeneous Panel ARDL Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 13(2), pages 1444-1469, June.
    3. Frankel, Jeffrey, 2010. "Monetary Policy in Emerging Markets," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 25, pages 1439-1520, Elsevier.
    4. repec:aer:wpaper:320 is not listed on IDEAS
    5. Cem Ertur & Antonio Musolesi, 2017. "Weak and Strong Cross‐Sectional Dependence: A Panel Data Analysis of International Technology Diffusion," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 32(3), pages 477-503, April.
    6. Kyoji Fukao & Cristiano Perugini, 2021. "The Long‐Run Dynamics of the Labor Share in Japan," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 67(2), pages 445-480, June.
    7. Ghosh, Atish R. & Ostry, Jonathan D. & Qureshi, Mahvash S., 2018. "Taming the Tide of Capital Flows: A Policy Guide," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262037165, April.
    8. Naima Chrid & Sami Saafi & Mohamed Chakroun, 2021. "Export Upgrading and Economic Growth: a Panel Cointegration and Causality Analysis," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(2), pages 811-841, June.
    9. Gangopadhyay, Partha & Jain, Siddharth & Bakry, Walid, 2022. "In search of a rational foundation for the massive IT boom in the Australian banking industry: Can the IT boom really drive relationship banking?," International Review of Financial Analysis, Elsevier, vol. 82(C).
    10. Clement ANNE, 2016. "Are Commodity Price Booms an Opportunity to Diversify? Evidence from Resource-dependent Countries," Working Papers 201615, CERDI.
    11. Hector Sala & Pedro Trivín, 2018. "The effects of globalization and technology on the elasticity of substitution," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(3), pages 617-647, August.
    12. Vincenzo Bove & Leandro Elia, 2013. "Drugs and Violence in Afghanistan: A Panel Var With Unobserved Common Factor Analysis," Defence and Peace Economics, Taylor & Francis Journals, vol. 24(6), pages 535-554, December.
    13. Diego Ivan Ruge Leiva & Giuseppe Caivano, 2017. "Stock Markets, Banks and Economic Growth in a Context of Common Shocks and Cross-Country Dependencies (Suplement)," Working Papers 04/17, Instituto Universitario de Análisis Económico y Social.
    14. Markus Eberhardt & Andrea F. Presbitero, 2013. "This Time They’re Different: Heterogeneity and Nonlinearity in the Relationship between Debt and Growth," Discussion Papers 2013/10, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    15. Bonizzi, Bruno, 2017. "Institutional investors’ allocation to emerging markets: A panel approach to asset demand," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 47(C), pages 47-64.
    16. Usman, Muhammad & Makhdum, Muhammad Sohail Amjad, 2021. "What abates ecological footprint in BRICS-T region? Exploring the influence of renewable energy, non-renewable energy, agriculture, forest area and financial development," Renewable Energy, Elsevier, vol. 179(C), pages 12-28.
    17. Arouri, Mohamed El Hedi & Ben Youssef, Adel & M'henni, Hatem & Rault, Christophe, 2012. "Energy consumption, economic growth and CO2 emissions in Middle East and North African countries," Energy Policy, Elsevier, vol. 45(C), pages 342-349.
    18. Stephen K. Dimnwobi & Chukwunonso Ekesiobi & Chekwube V. Madichie & Simplice A. Asongu, 2021. "Population Dynamics and Environmental Quality in Africa," Working Papers 21/047, European Xtramile Centre of African Studies (EXCAS).
    19. Adolfo Maza & Paula Gutiérrez-Portilla, 2022. "Outward FDI and exports relation: A heterogeneous panel approach dealing with cross-sectional dependence," International Economics, CEPII research center, issue 170, pages 174-189.
    20. Nin Pratt, Alejandro & Falconi, César & Ludeña, Carlos E. & Martel, Pedro, 2015. "Productivity and the Performance of Agriculture in Latin America and the Caribbean: From the Lost Decade to the Commodity Boom," IDB Publications (Working Papers) 7306, Inter-American Development Bank.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aic:saebjn:v:70:y:2023:i:1:p:83-96:n:8. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sireteanu Napoleon-Alexandru (email available below). General contact details of provider: https://edirc.repec.org/data/feaicro.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.