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Financial Development and African Participation in Global Value Chains

In: Financing Africa’s Development

Author

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  • Françoise Okah Efogo

    (University of Yaoundé II)

Abstract

This paper investigates the contribution of financial development for African countries’ participation in global value chains (GVCs). It relies on a review of the theoretical and empirical literature that can shed light on the mechanisms whereby financial development affects value-added trade. A panel econometric analysis covering 36 African countries between 2000 and 2018 supplements the theoretical analysis. Data used for this empirical analysis comes from the WDI (2018), UNCTAD_EORA (The Eora Multi-Region Input-Output Database, 2018) and UNDP (2018) databases. The Financial Development Index is a multidimensional synthetic index constructed by the IMF (2018). Theoretical analysis shows that very little work has addressed this issue, although there is considerable evidence that financial development has a positive impact on the conditions for participation in and upgrading within a GVC. As for the empirical results, they reveal that financial development increases the participation of African countries in GVCs. However, some dimensions of financial development do not have a positive effect. Moreover, regional features are important in understanding the relationship between financial development and value-added trade. This research is therefore a useful tool for decision-making in promoting financial development for deeper African countries’ participation in GVCs.

Suggested Citation

  • Françoise Okah Efogo, 2020. "Financial Development and African Participation in Global Value Chains," Advances in African Economic, Social and Political Development, in: Diery Seck (ed.), Financing Africa’s Development, pages 33-52, Springer.
    • Handle: RePEc:spr:aaechp:978-3-030-46482-0_3
    DOI: 10.1007/978-3-030-46482-0_3
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    Citations

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    Cited by:

    1. Takpara, Moukaila Mouzamilou & Fouopi Djiogap, Constant & Sawadogo, Bouraima, 2022. "Trade Policy and African Participation in Global Value Chains: Does Trade Facilitation Matter?," Conference papers 333499, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    2. Ajide, Folorunsho M. & Sakariyahu, Rilwan & Lawal, Rodiat & Etudaiye-Muhtar, Oyebola Fatima & Johan, Sofia, 2023. "Mobile money innovation and global value chain participation: Evidence from developing countries," Finance Research Letters, Elsevier, vol. 58(PD).
    3. Abdulkareem Alhassan & Joshua Dzankar Zoaka & Salim Hamza Ringim, 2021. "Africa as headwaiter at the dining table of global value chains: Do institutions matter for her participation?," African Development Review, African Development Bank, vol. 33(3), pages 560-576, September.
    4. Shen Jiahao & Ridwan Lanre Ibrahim & Kazeem Ajide Bello & David Mautin Oke, 2022. "Trade facilitation, institutions, and sustainable economic growth: Empirical evidence from Sub‐Saharan Africa," African Development Review, African Development Bank, vol. 34(2), pages 201-214, June.
    5. Emerta Aragie & Alemayehu Seyoum Taffesse & James Thurlow, 2021. "The short‐term economywide impacts of COVID‐19 in Africa: Insights from Ethiopia," African Development Review, African Development Bank, vol. 33(S1), pages 152-164, April.
    6. Ha, Le Thanh, 2023. "The role of financial development in enhancing trades in environmental goods: International insights from 119 countries," Journal of Commodity Markets, Elsevier, vol. 29(C).

    More about this item

    Keywords

    Financial development; Global value chain; Backward participation; Forward participation; Africa;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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