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Financial liberalisation, Banking Crises and Economic Growth in African Countries

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  • Enowbi Batuo, Michael
  • Mlambo, Kupukile

Abstract

While financial liberalisation is considered to be good for economic growth in that it promotes the development of the financial sector, banking crises on the other hand tend to be inimical for economic growth. Moreover, banking crises tend to be preceded by financial liberalisation, as noted in a number of studies. This is because financial liberalisation tends to induce greater risk-taking behaviour by agents, thus leading to banking crises. In this paper we study the effect of financial liberalisation and banking crises on the economic performance of African countries during the period covering 1985 to 2010. Using a treatment effect, two step methods and a panel probit method, our results show that banking crises have a negative impact on economic growth meanwhile financial liberalisation tends to reduce the likelihood of banking crises in African countries.

Suggested Citation

  • Enowbi Batuo, Michael & Mlambo, Kupukile, 2012. "Financial liberalisation, Banking Crises and Economic Growth in African Countries," MPRA Paper 41524, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:41524
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    References listed on IDEAS

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    Cited by:

    1. Dandume, Muhammad Yusuf & A.C., Dr.Malarvizhi, 2014. "Does Financial Liberalization, Spur Economic Growth and Poverty Reduction in Six Sub-Saharan African Countries; Panel Unit Root and Panel Vector Error Correction Tests," MPRA Paper 52349, University Library of Munich, Germany, revised Aug 2013.
    2. Nolungelo Cele & Kapingura FM, 2018. "Financial Sector Liberalization and Financial Instability: Case of Selected Southern African Development Community Member Countries," Journal of Economics and Behavioral Studies, AMH International, vol. 10(6), pages 42-49.

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    More about this item

    Keywords

    O16; O47; G23; O55;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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