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Determinants Of Financial Stability In Sub-Saharan Africa

Author

Listed:
  • JIMA, Meshesha Demie

    (Department of Finance, Risk Management and Banking. University of South Africa, Pretoria, South Africa)

  • MAKONI, Patricia L.

    (Department of Finance, Risk Management and Banking. University of South Africa, Pretoria, South Africa.)

Abstract

Several factors determine the stability of a financial system. The main objective of this study is, thus, to empirically examine the key drivers of financial stability in the Sub-Saharan African (SSA) economies for the period of 2000 to 2019 using a dynamic panel Generalised Method of Moments (GMM). As financial inclusion and institutional quality broadly comprise of multiple individual measures, we constructed a composite index to proxy and represent each variable, respectively, which was then used later in the regression model to assess their effect on financial stability in the sampled economies. The findings of the study indicated that the lag effect and financial inclusion are the major positive drivers of financial stability in the SSA economies. Institutional quality, financial technology adoption and global financial crises also reflected a negative impact on the stability of a financial system in the region. Other variables seem to have no impact in the region. These findings underpin the need for policy makers and regulators to formulate and adopt macroeconomic policies that include more people in the financial system and markets, so that risks are spread over a greater populous, thereby sustaining financial stability. In addition, our scholarly contribution is that we highlight the possibilities of a trade-off between financial regulation, inclusion and digitalisation versus financial stability, which is an under- researched phenomena in financial studies.

Suggested Citation

  • JIMA, Meshesha Demie & MAKONI, Patricia L., 2022. "Determinants Of Financial Stability In Sub-Saharan Africa," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 26(3), pages 55-75, September.
    • Handle: RePEc:vls:finstu:v:26:y:2022:i:3:p:55-75
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    References listed on IDEAS

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    More about this item

    Keywords

    financial stability; financial inclusion; institutional quality; Sub-Saharan Africa (SSA);
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C38 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Classification Methdos; Cluster Analysis; Principal Components; Factor Analysis
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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