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On the macroeconomic determinants of financial institutions development in sub-Saharan Africa

Author

Listed:
  • Olufemi Adewale Aluko

    (University of Ilorin)

  • Muazu Ibrahim

    (University for Development Studies
    University of Witwatersrand)

Abstract

This study investigates the macroeconomic determinants of financial institutions development in a panel of 32 countries in sub-Saharan Africa from 1985 to 2015. Using the two-step system generalized method of moments dynamic panel model estimation approach, the results reveal that trade openness, income, and government expenditure are positive determinants of financial institutions development while higher inflation inhibits improvement in financial institutions. The results suggest that financial institutions are better developed in countries with higher trade openness, income, and government expenditure and are less developed in high-inflation countries. The results are not robust to the dimensions of financial institutions development considered in this study. Policy implications are documented.

Suggested Citation

  • Olufemi Adewale Aluko & Muazu Ibrahim, 2020. "On the macroeconomic determinants of financial institutions development in sub-Saharan Africa," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 67(1), pages 69-85, March.
    • Handle: RePEc:spr:inrvec:v:67:y:2020:i:1:d:10.1007_s12232-019-00332-x
    DOI: 10.1007/s12232-019-00332-x
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    3. Liang, Xuefang & Qianqian, Ding & Xiaozhou, Zhu & Ullah, Midrar, 2024. "Asymmetric relationship between natural resources extraction policy and financial development exist? A conflict and comparative analysis between China and US," Resources Policy, Elsevier, vol. 90(C).
    4. Ofori, Isaac K. & Quaidoo, Christopher & Ofori, Pamela E., 2021. "What Drives Financial Sector Development in Africa? Insights from Machine Learning," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue forthcomi.

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    More about this item

    Keywords

    Financial institutions development; Financial institutions depth; Financial institutions efficiency; Financial institutions access;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • G2 - Financial Economics - - Financial Institutions and Services
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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