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Financial development and poverty: evidence from the CFA Franc Zone

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  • Youssouf Kiendrebeogo
  • Alexandru Minea

Abstract

The financial liberalization in the 1980s and early 1990s led the CFA Franc Zone countries to deepen reforms in their financial systems. These reforms fostered financial development, which in turn may have reduced income poverty, as emphasized by several theoretical arguments in the literature. This study aims at estimating the contribution of financial development to poverty alleviation in the CFA Franc Zone. Results based on a panel of CFA Franc Zone countries show that financial development is associated with a drop in the proportion of poor population. Next, financial development reduces the extent to which the income of individuals falls below the poverty line. Moreover, in some cases, the effect of financial development on poverty may be subject to nonlinearities. Finally, financial instability or unstable financial development leading to crises may mitigate the favourable effect of financial development on poverty reduction. These findings are robust to the use of alternative measures of financial development and hold after controlling for a potential simultaneity and a small sample biases.

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  • Youssouf Kiendrebeogo & Alexandru Minea, 2016. "Financial development and poverty: evidence from the CFA Franc Zone," Applied Economics, Taylor & Francis Journals, vol. 48(56), pages 5421-5436, December.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:56:p:5421-5436
    DOI: 10.1080/00036846.2016.1176114
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    3. Jakob Haan & Regina Pleninger & Jan-Egbert Sturm, 2022. "Does Financial Development Reduce the Poverty Gap?," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 161(1), pages 1-27, May.
    4. Gnangnon, Sèna Kimm, 2020. "Aid for Trade flows and Poverty Reduction in Recipient-Countries," EconStor Preprints 213807, ZBW - Leibniz Information Centre for Economics.
    5. Sosson Tadadjeu & Brice Kamguia & Ronald Djeunankan, 2023. "Access to drinking water and sanitation in developing countries: Does financial development matter?," International Review of Applied Economics, Taylor & Francis Journals, vol. 37(4), pages 457-481, July.
    6. Lemnge, Deusdedit & Raphael, Gwahula & Mutasa, Felician, 2024. "The Moderating Effect of Gender Equality in Reproductive health on the Relationship between Financial Development and Poverty Reduction in sub-Saharan Africa: A Quantile Regression Approach," African Journal of Economic Review, African Journal of Economic Review, vol. 12(2), June.
    7. Sena Kimm Gnangnon, 2021. "Poverty volatility and poverty in developing countries," Economic Affairs, Wiley Blackwell, vol. 41(1), pages 84-95, February.
    8. Dina Chhorn, 2021. "Financial development, poverty, and human development in the Fintech age: a regional analysis of the Southeast Asian states," Post-Print hal-03572473, HAL.

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