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A Re-Examination of the Effect of Financial Integration on Financial Development in Sub-Saharan Africa

Received: 28 July 2023     Accepted: 28 August 2023     Published: 20 September 2023
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Abstract

This paper aims to analyse the relationship between financial integration and financial development in Sub-Saharan Africa (SSA). To achieve this objective, we use a methodological approach based on panel data over the period 2000-2021 in 39 SSA countries. By estimating the panel threshold regression dynamic model (PTR Dynamic model) and using the Generalised method of moments (GMM), we show that there is a significant non-linear relationship between financial integration and financial development. This non-linear relationship refines existing evidence between financial integration and financial development. The optimal threshold of financial integration, defined as the level of financial integration that maximises financial development, is 69%. Therefore, the optimal level of financial integration is robust to sensitivity analysis, resulting in thresholds between 67% and 70%. The results show that financial integration has a differentiated effect on financial development depending on its sign. More specifically, below 69%, financial integration has a positive and significant effect on financial development; but above this 69% threshold, financial integration has a negative and significant effect on financial development. The public and monetary authorities must therefore take prudential measures into account in order to maintain the development of the financial system.

Published in International Journal of Economics, Finance and Management Sciences (Volume 11, Issue 5)
DOI 10.11648/j.ijefm.20231105.11
Page(s) 212-222
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2023. Published by Science Publishing Group

Keywords

Financial Integration, Financial Development, PTR Dynamic, GMM

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Cite This Article
  • APA Style

    Munana Kabwika Cedric, Dial Mouhamadou Lamine, Diallo Mamadou Nouhou. (2023). A Re-Examination of the Effect of Financial Integration on Financial Development in Sub-Saharan Africa. International Journal of Economics, Finance and Management Sciences, 11(5), 212-222. https://doi.org/10.11648/j.ijefm.20231105.11

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    ACS Style

    Munana Kabwika Cedric; Dial Mouhamadou Lamine; Diallo Mamadou Nouhou. A Re-Examination of the Effect of Financial Integration on Financial Development in Sub-Saharan Africa. Int. J. Econ. Finance Manag. Sci. 2023, 11(5), 212-222. doi: 10.11648/j.ijefm.20231105.11

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    AMA Style

    Munana Kabwika Cedric, Dial Mouhamadou Lamine, Diallo Mamadou Nouhou. A Re-Examination of the Effect of Financial Integration on Financial Development in Sub-Saharan Africa. Int J Econ Finance Manag Sci. 2023;11(5):212-222. doi: 10.11648/j.ijefm.20231105.11

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  • @article{10.11648/j.ijefm.20231105.11,
      author = {Munana Kabwika Cedric and Dial Mouhamadou Lamine and Diallo Mamadou Nouhou},
      title = {A Re-Examination of the Effect of Financial Integration on Financial Development in Sub-Saharan Africa},
      journal = {International Journal of Economics, Finance and Management Sciences},
      volume = {11},
      number = {5},
      pages = {212-222},
      doi = {10.11648/j.ijefm.20231105.11},
      url = {https://doi.org/10.11648/j.ijefm.20231105.11},
      eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.ijefm.20231105.11},
      abstract = {This paper aims to analyse the relationship between financial integration and financial development in Sub-Saharan Africa (SSA). To achieve this objective, we use a methodological approach based on panel data over the period 2000-2021 in 39 SSA countries. By estimating the panel threshold regression dynamic model (PTR Dynamic model) and using the Generalised method of moments (GMM), we show that there is a significant non-linear relationship between financial integration and financial development. This non-linear relationship refines existing evidence between financial integration and financial development. The optimal threshold of financial integration, defined as the level of financial integration that maximises financial development, is 69%. Therefore, the optimal level of financial integration is robust to sensitivity analysis, resulting in thresholds between 67% and 70%. The results show that financial integration has a differentiated effect on financial development depending on its sign. More specifically, below 69%, financial integration has a positive and significant effect on financial development; but above this 69% threshold, financial integration has a negative and significant effect on financial development. The public and monetary authorities must therefore take prudential measures into account in order to maintain the development of the financial system.},
     year = {2023}
    }
    

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  • TY  - JOUR
    T1  - A Re-Examination of the Effect of Financial Integration on Financial Development in Sub-Saharan Africa
    AU  - Munana Kabwika Cedric
    AU  - Dial Mouhamadou Lamine
    AU  - Diallo Mamadou Nouhou
    Y1  - 2023/09/20
    PY  - 2023
    N1  - https://doi.org/10.11648/j.ijefm.20231105.11
    DO  - 10.11648/j.ijefm.20231105.11
    T2  - International Journal of Economics, Finance and Management Sciences
    JF  - International Journal of Economics, Finance and Management Sciences
    JO  - International Journal of Economics, Finance and Management Sciences
    SP  - 212
    EP  - 222
    PB  - Science Publishing Group
    SN  - 2326-9561
    UR  - https://doi.org/10.11648/j.ijefm.20231105.11
    AB  - This paper aims to analyse the relationship between financial integration and financial development in Sub-Saharan Africa (SSA). To achieve this objective, we use a methodological approach based on panel data over the period 2000-2021 in 39 SSA countries. By estimating the panel threshold regression dynamic model (PTR Dynamic model) and using the Generalised method of moments (GMM), we show that there is a significant non-linear relationship between financial integration and financial development. This non-linear relationship refines existing evidence between financial integration and financial development. The optimal threshold of financial integration, defined as the level of financial integration that maximises financial development, is 69%. Therefore, the optimal level of financial integration is robust to sensitivity analysis, resulting in thresholds between 67% and 70%. The results show that financial integration has a differentiated effect on financial development depending on its sign. More specifically, below 69%, financial integration has a positive and significant effect on financial development; but above this 69% threshold, financial integration has a negative and significant effect on financial development. The public and monetary authorities must therefore take prudential measures into account in order to maintain the development of the financial system.
    VL  - 11
    IS  - 5
    ER  - 

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Author Information
  • Centre for Applied Economic Research, Faculty of Economics and Management, University of Cheikh Anta Diop of Dakar, Dakar, Senegal

  • Centre for Applied Economic Research, Faculty of Economics and Management, University of Cheikh Anta Diop of Dakar, Dakar, Senegal

  • Laboratory of Finance for Development (LAFIDEV), Centre for Applied Economic Research, Faculty of Economics and Management, University of Cheikh Anta Diop of Dakar, Dakar, Senegal

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