@workingpaper{Asongu2015bj,
title = {Financial globalisation uncertainty/instability is good for financial development},
author = {Isaac Koomson & Vanessa Tchamyou S Simplice A. Asongu},
editor = {African 2015 Governance and Development Institute WP/15/046},
url = {http://www.afridev.org/RePEc/agd/agd-wpaper/Financial-globalisation-uncertainty-is-good-for-financial-development.pdf},
year = {2015},
date = {2015-11-01},
abstract = {Purpose – This study assesses the effect of time-dynamic financial globalisation uncertainty on
financial development in 53 African countries for the period 2000-2011.
Design/methodology/approach – Financial globalisation uncertainty is estimated as timedynamic
to capture business cycle disturbances while all dimensions identified by the Financial
Development and Structure Database of the World Bank are employed, namely: financial depth
(money supply and liquid liabilities), financial system efficiency (at banking and financial
system levels), financial system activity (from banking system and financial system
perspectives) and financial size. The empirical evidence is based on the Generalised Method of
Moments with forward orthogonal deviations.
Findings- The following findings are established. First, financial globalisation uncertainty does
not significantly affect money supply, financial system deposits and financial size. Second, the
uncertainty increases banking system efficiency, banking system activity and financial system
activity. Moreover, the positive effects are consistently driven by above-median uncertainty
levels.
Practical implications- It follows that uncertainty in foreign capital flows may be a disguised
advantage for domestic financial development, especially in dealing with the substantially
documented issue of surplus liquidity in African financial institutions. Moreover, the sceptical
view in the financial globalisation literature that ‘allocation efficiency’ is only plausible in the
absence of uncertainty/instability is not substantiated by the findings. Justifications for the
nexuses and other policy implications are discussed.
Originality/value- To the best of our knowledge this is the first study to assess the effects of
financial globalisation uncertainty on financial development in Africa using time-dynamic
measurements of financial globalisation uncertainty and all dimensions identified by the
Financial Development and Structure Database of the World Bank.},
keywords = {Banking; Financial integration; Development},
pubstate = {published},
tppubtype = {workingpaper}
}