IDEAS home Printed from https://ideas.repec.org/p/abh/wpaper/16-048.html
   My bibliography  Save this paper

Information Asymmetry and Financial Dollarization in Sub-Saharan Africa

Author

Listed:
  • Simplice A. Asongu

    (Yaoundé/Cameroon)

  • Ibrahim D. Raheem

    (Canterbury, UK)

  • Vanessa S. Tchamyou

    (Yaoundé, Cameroon)

Abstract

Financial dollarization in Sub-Saharan Africa is the most persistent compared to other regions of the world. This study complements the existing scant literature on dollarization in Africa by assessing the role of information sharing offices (public credit registries and private credit bureaus) on financial dollarization in 26 countries of SSA for the period 2001-2012. The empirical evidence is based on Ordinary Least Squares (OLS) and Generalised Method of Moments (GMM). The findings show that information sharing offices (which are designed to reduce information asymmetry) in the banking industry are a deterrent to dollarization. Policy implications are discussed.

Suggested Citation

  • Simplice A. Asongu & Ibrahim D. Raheem & Vanessa S. Tchamyou, 2016. "Information Asymmetry and Financial Dollarization in Sub-Saharan Africa," Research Africa Network Working Papers 16/048, Research Africa Network (RAN).
    • Handle: RePEc:abh:wpaper:16/048
    as

    Download full text from publisher

    File URL: http://publications.resanet.org/RePEc/abh/abh-wpaper/Information-Asymmetry-and-Financial-Dollarization-in-Sub-Saharan-Africa.pdf
    File Function: Revised version, 2018
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Asongu, Simplice A. & Nwachukwu, Jacinta C., 2016. "The Mobile Phone in the Diffusion of Knowledge for Institutional Quality in Sub-Saharan Africa," World Development, Elsevier, vol. 86(C), pages 133-147.
    2. Vieira, Fabrício A.C. & Holland, Márcio & Resende, Marco F., 2012. "Financial dollarization and systemic risks: New empirical evidence," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1695-1714.
    3. Vanessa S. Tchamyou & Simplice A. Asongu, 2017. "Information Sharing and Financial Sector Development in Africa," Journal of African Business, Taylor & Francis Journals, vol. 18(1), pages 24-49, January.
    4. Augustin Kwasi Fosu, 2013. "Growth of African Economies: Productivity, Policy Syndromes and the Importance of Institutions," Journal of African Economies, Centre for the Study of African Economies, vol. 22(4), pages 523-551, August.
    5. Raheem, Ibrahim Dolapo & Asongu, Simplice A., 2018. "Extending the determinants of dollarization in sub-Saharan Africa: The role of easy access to foreign exchange earnings," Research in International Business and Finance, Elsevier, vol. 45(C), pages 106-120.
    6. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    7. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    8. Simplice A. Asongu & Jacinta C. Nwachukwu, 2016. "Foreign aid and governance in Africa," International Review of Applied Economics, Taylor & Francis Journals, vol. 30(1), pages 69-88, January.
    9. Asongu, Simplice & Nwachukwu, Jacinta C., 2016. "Welfare Spending and Quality of Growth in Developing Countries: A Note on Evidence from Hopefuls, Contenders and Best Performers," MPRA Paper 75047, University Library of Munich, Germany.
    10. Paolo Coccorese, 2012. "Information sharing, market competition and antitrust intervention: a lesson from the Italian insurance sector," Applied Economics, Taylor & Francis Journals, vol. 44(3), pages 351-359, January.
    11. De Nicolo, Gianni & Honohan, Patrick & Ize, Alain, 2003. "Dollarization of the banking system : good or bad?," Policy Research Working Paper Series 3116, The World Bank.
    12. Djankov, Simeon & McLiesh, Caralee & Shleifer, Andrei, 2007. "Private credit in 129 countries," Journal of Financial Economics, Elsevier, vol. 84(2), pages 299-329, May.
    13. Yinusa, D. Olalekan, 2009. "Macroeconomic Fluctuations and Deposit Dollarization in Sub-Saharan Africa: Evidence from Panel Data," MPRA Paper 16259, University Library of Munich, Germany, revised 2009.
    14. Antonio Doblas‐Madrid, 2009. "Fiscal Trends and Self‐Fulfilling Crises," Review of International Economics, Wiley Blackwell, vol. 17(1), pages 187-204, February.
    15. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Law and finance: why does legal origin matter?," Journal of Comparative Economics, Elsevier, vol. 31(4), pages 653-675, December.
    16. Acharya, Viral V. & Amihud, Yakov & Litov, Lubomir, 2011. "Creditor rights and corporate risk-taking," Journal of Financial Economics, Elsevier, vol. 102(1), pages 150-166, October.
    17. Brockman, Paul & Unlu, Emre, 2009. "Dividend policy, creditor rights, and the agency costs of debt," Journal of Financial Economics, Elsevier, vol. 92(2), pages 276-299, May.
    18. Brown, Martin & Jappelli, Tullio & Pagano, Marco, 2009. "Information sharing and credit: Firm-level evidence from transition countries," Journal of Financial Intermediation, Elsevier, vol. 18(2), pages 151-172, April.
    19. Simplice A. Asongu & Jacinta C. Nwachukwu, 2017. "The Comparative Inclusive Human Development of Globalisation in Africa," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 134(3), pages 1027-1050, December.
    20. David Kelsey & Sara Le Roux, 2017. "Dragon Slaying with Ambiguity: Theory and Experiments," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(1), pages 178-197, February.
    21. Jappelli, Tullio & Pagano, Marco, 2002. "Information sharing, lending and defaults: Cross-country evidence," Journal of Banking & Finance, Elsevier, vol. 26(10), pages 2017-2045, October.
    22. Stijn Claessens & Leora F. Klapper, 2005. "Bankruptcy around the World: Explanations of Its Relative Use," American Law and Economics Review, American Law and Economics Association, vol. 7(1), pages 253-283.
    23. Ivashina, Victoria, 2009. "Asymmetric information effects on loan spreads," Journal of Financial Economics, Elsevier, vol. 92(2), pages 300-319, May.
    24. Badi H. Baltagi, 2008. "Forecasting with panel data," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 27(2), pages 153-173.
    25. Ize, Alain & Yeyati, Eduardo Levy, 2003. "Financial dollarization," Journal of International Economics, Elsevier, vol. 59(2), pages 323-347, March.
    26. Joshua Aizenman & Kenneth M. Kletzer & Brian Pinto, 2005. "Sargent-Wallace meets Krugman-Flood-Garber, or: why sovereign debt swaps do not avert macroeconomic crises," Economic Journal, Royal Economic Society, vol. 115(503), pages 343-367, April.
    27. Nicolo, Gianni De & Honohan, Patrick & Ize, Alain, 2005. "Dollarization of bank deposits: Causes and consequences," Journal of Banking & Finance, Elsevier, vol. 29(7), pages 1697-1727, July.
    28. Geng Li, 2014. "Information Sharing and Stock Market Participation: Evidence from Extended Families," The Review of Economics and Statistics, MIT Press, vol. 96(1), pages 151-160, March.
    29. Augustin Kwasi Fosu, 2013. "Growth of African Economies: Productivity, Policy Syndromes and the Importance of Institutions," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(4), pages 523-551, August.
    30. Canzoneri, Matthew B. & Diba, Behzad T., 1992. "The inflation discipline of currency substitution," European Economic Review, Elsevier, vol. 36(4), pages 827-845, May.
    31. David Kelsey & Sara le Roux, 2018. "Strategic ambiguity and decision-making: an experimental study," Theory and Decision, Springer, vol. 84(3), pages 387-404, May.
    32. David Roodman, 2009. "A Note on the Theme of Too Many Instruments," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(1), pages 135-158, February.
    33. Mr. Alain Ize & Mr. Eric Parrado, 2002. "Dollarization, Monetary Policy, and the Pass-Through," IMF Working Papers 2002/188, International Monetary Fund.
    34. Iris Claus & Arthur Grimes, 2003. "Asymmetric Information, Financial Intermediation and the Monetary Transmission Mechanism: A Critical Review," Treasury Working Paper Series 03/19, New Zealand Treasury.
    35. Kessy, Pantaleo, 2011. "Dollarization in Tanzania: empirical evidence and cross-country experience," LSE Research Online Documents on Economics 36381, London School of Economics and Political Science, LSE Library.
    36. Kangni Kpodar & Raju Jan Singh & Dhaneshwar Ghura, 2009. "Financial Deepening in the CFA Franc Zone: The Role of Institutions," Post-Print hal-00450079, HAL.
    37. Barth, James R. & Lin, Chen & Lin, Ping & Song, Frank M., 2009. "Corruption in bank lending to firms: Cross-country micro evidence on the beneficial role of competition and information sharing," Journal of Financial Economics, Elsevier, vol. 91(3), pages 361-388, March.
    38. Thouraya Triki & Ousman Gajigo, 2014. "Credit Bureaus and Registration and Access to Finance: New Evidence from 42 African Countries," Journal of African Development, African Finance and Economic Association (AFEA), vol. 16(2), pages 73-101.
    39. Houston, Joel F. & Lin, Chen & Lin, Ping & Ma, Yue, 2010. "Creditor rights, information sharing, and bank risk taking," Journal of Financial Economics, Elsevier, vol. 96(3), pages 485-512, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ibrahim D. Raheem, 2018. "Inflation rate of 14–16% is fair for the sub-Saharan African dollarization," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 42(4), pages 779-794, October.
    2. Kazeem B. Ajide & Ibrahim D. Raheem & Simplice A. Asongu, 2018. "Dollarization and the “Unbundling†of Globalization in sub-Saharan Africa," AFEA Working Papers 18/029, African Finance and Economic Association (AFEA).
    3. Ajide, Kazeem B. & Raheem, Ibrahim D. & Asongu, Simplice A., 2019. "Dollarization and the “unbundling” of globalization in sub-Saharan Africa," Research in International Business and Finance, Elsevier, vol. 47(C), pages 398-409.
    4. Atenga, Eric Martial Etoundi & Mougoué, Mbodja, 2021. "Return and volatility spillovers to African currencies markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 73(C).

    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. Asongu, Simplice A., 2017. "The effect of reducing information asymmetry on loan price and quantity in the African banking industry," Research in International Business and Finance, Elsevier, vol. 41(C), pages 185-197.
    2. Asongu, Simplice & Le Roux, Sara, 2016. "Reducing Information Asymmetry with ICT: A critical review of loan price and quantity effects in Africa," MPRA Paper 75043, University Library of Munich, Germany.
    3. Simplice A. Asongu, Phd & Joseph Nnanna D.B.A, . "Ict In Reducing Information Asymmmetry For Financial Sector Competition," Journal of Economic and Sustainable Growth 1, Office Of The Chief Economist, Development Bank of Nigeria.
    4. Vanessa S. Tchamyou & Simplice A. Asongu, 2017. "Information Sharing and Financial Sector Development in Africa," Journal of African Business, Taylor & Francis Journals, vol. 18(1), pages 24-49, January.
    5. Vanessa S. Tchamyou, 2019. "The Role of Information Sharing in Modulating the Effect of Financial Access on Inequality," Journal of African Business, Taylor & Francis Journals, vol. 20(3), pages 317-338, July.
    6. Asongu, Simplice A. & Moulin, Bertrand, 2016. "The role of ICT in reducing information asymmetry for financial access," Research in International Business and Finance, Elsevier, vol. 38(C), pages 202-213.
    7. Asongu, Simplice A. & Nwachukwu, Jacinta C., 2017. "The synergy of financial sector development and information sharing in financial access: Propositions and empirical evidence," Research in International Business and Finance, Elsevier, vol. 40(C), pages 242-258.
    8. Simplice Asongu & Jacinta C. Nwachukwu & Vanessa S. Tchamyou, 2015. "Information Asymmetry and Financial Development Dynamics in Africa," Working Papers of the African Governance and Development Institute. 15/025, African Governance and Development Institute..
    9. Simplice A. Asongu & John C. Anyanwu & Vanessa S. Tchamyou, 2019. "Technology-driven information sharing and conditional financial development in Africa," Information Technology for Development, Taylor & Francis Journals, vol. 25(4), pages 630-659, October.
    10. Boateng, Agyenim & Asongu, Simplice & Akamavi, Raphael & Tchamyou, Vanessa, 2018. "Information asymmetry and market power in the African banking industry," Journal of Multinational Financial Management, Elsevier, vol. 44(C), pages 69-83.
    11. Simplice A. Asongu & Jacinta C. Nwachukwu, 2017. "At what levels of financial development does information sharing matter?," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 3(1), pages 1-30, December.
    12. Simplice A. Asongu & Nicholas M. Odhiambo, 2020. "The Mobile Phone, Information Sharing, and Financial Sector Development in Africa: a Quantile Regression Approach," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 11(3), pages 1234-1269, September.
    13. Simplice A. Asongu & Sara Le Roux & Vanessa S. Tchamyou, 2019. "Essential information sharing thresholds for reducing market power in financial access: a study of the African banking industry," Journal of Banking Regulation, Palgrave Macmillan, vol. 20(1), pages 34-50, March.
    14. Simplice Asongu & Jacinta Nwachukwu, 2017. "Information asymmetry and conditional financial sector development," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 9(4), pages 372-392, November.
    15. Asongu, Simplice & Anyanwu, John & Tchamyou, Vanessa, 2016. "Information sharing and conditional financial development in Africa," MPRA Paper 74653, University Library of Munich, Germany.
    16. Simplice Asongu & Jacinta Nwachukwu, 2018. "Bank size, information sharing and financial access in Africa," International Journal of Managerial Finance, Emerald Group Publishing Limited, vol. 14(2), pages 188-209, February.
    17. Simplice A. Asongu & Nicholas M. Odhiambo, 2021. "Information Asymmetry and Insurance in Africa," Journal of African Business, Taylor & Francis Journals, vol. 22(3), pages 394-410, July.
    18. Asongu, Simplice & Batuo, Enowbi & Nwachukwu, Jacinta & Tchamyou, Vanessa, 2018. "Is information diffusion a threat to market power for financial access? Insights from the African banking industry," Journal of Multinational Financial Management, Elsevier, vol. 45(C), pages 88-104.
    19. Simplice A. Asongu & Nicholas M. Odhiambo, 2018. "Information asymmetry, financialization, and financial access," International Finance, Wiley Blackwell, vol. 21(3), pages 297-315, December.
    20. Raheem, Ibrahim Dolapo & Asongu, Simplice A., 2018. "Extending the determinants of dollarization in sub-Saharan Africa: The role of easy access to foreign exchange earnings," Research in International Business and Finance, Elsevier, vol. 45(C), pages 106-120.

    More about this item

    Keywords

    Dollarization; Openness; Information Asymmetry; Africa;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

    Statistics

    Access and download statistics

    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:abh:wpaper:16/048. 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: Anutechia Asongu Simplice (email available below). General contact details of provider: http://www.resanet.org .

    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.