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Liberalisation and Financial Sector Competition: A Critical Contribution to the Empirics with an African Assessment

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  • Simplice Asongu
Abstract
This paper investigates how financial, trade, institutional and political liberalisation policies have affected financial sector competition in Africa using updated data to appraise second-generation reforms. The “freedom to trade” and “economic freedom” indices are employed. Hitherto, unexplored financial sector concepts of formalisation, semi-formalisation, informalisation and non-formalisation are also introduced. The following findings are established. First, relative to money supply, (i) with the exception of the economic freedom mechanism, liberalisation policies have generally decreased the growth of the formal financial sector to the benefit of other financial sectors; (ii) apart from the foreign direct investment and economic freedom channels, liberalisation policies have been fruitful for semi-formal financial development at the cost of other financial sectors and; (iii) with the exception of economic freedom, both the informal and non-formal sectors have developed owing to liberalisation to the detriment of the formal financial sector. Second, relative to gross domestic product, the semi-formal, informal and/or non-formal financial sectors have also generally improved as a result of liberalisation. Policy implications are discussed.

Suggested Citation

  • Simplice Asongu, 2015. "Liberalisation and Financial Sector Competition: A Critical Contribution to the Empirics with an African Assessment," South African Journal of Economics, Economic Society of South Africa, vol. 83(3), pages 425-451, September.
    • Handle: RePEc:bla:sajeco:v:83:y:2015:i:3:p:425-451
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    More about this item

    JEL classification:

    • D60 - Microeconomics - - Welfare Economics - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • F30 - International Economics - - International Finance - - - General
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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