Determinants of financial intermediation in the SACU countries: Preliminary evidence from a panel data analysis
- Authors: Aziakpono, Meshach J
- Date: 2004
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469687 , vital:77278
- Description: The study explores empirically five macroeconomic determinants of financial intermediation, namely: growth in income, level of real income, inflation rate, exchange rate and interest rate spread in five SACU countries. Employing four measures of financial intermediation, an equilibrium model of financial intermediation was estimated using a system seemingly unrelated regression panel estimator. The fixed effect and country-specific coefficients were obtained and interpreted. The level of income and exchange rate were the most important determinants of financial intermediation among the countries. In line with theoretical models, which indicate that the level of economic growth can accelerate the process of financial intermediation, in three of the countries - Botswana, Namibia and South Africa, a very significant positive relationship between level of income and the indexes of financial intermediation was observed. But for Lesotho and Swaziland, a reverse relationship was obtained. This may be due to negative externalities from the more developed financial sectors of South Africa resulting from the economic and monetary integration. The results on the exchange rate highlight the need for a stable and predictable exchange rate policy in order to stimulate financial intermediation. Also, the results confirm the potential for inflation to negatively affect financial intermediation. Lastly, the results relating to interest rate spread highlight how high levels of the spread can prevent deep financial intermediation.
- Full Text:
- Date Issued: 2004
- Authors: Aziakpono, Meshach J
- Date: 2004
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469687 , vital:77278
- Description: The study explores empirically five macroeconomic determinants of financial intermediation, namely: growth in income, level of real income, inflation rate, exchange rate and interest rate spread in five SACU countries. Employing four measures of financial intermediation, an equilibrium model of financial intermediation was estimated using a system seemingly unrelated regression panel estimator. The fixed effect and country-specific coefficients were obtained and interpreted. The level of income and exchange rate were the most important determinants of financial intermediation among the countries. In line with theoretical models, which indicate that the level of economic growth can accelerate the process of financial intermediation, in three of the countries - Botswana, Namibia and South Africa, a very significant positive relationship between level of income and the indexes of financial intermediation was observed. But for Lesotho and Swaziland, a reverse relationship was obtained. This may be due to negative externalities from the more developed financial sectors of South Africa resulting from the economic and monetary integration. The results on the exchange rate highlight the need for a stable and predictable exchange rate policy in order to stimulate financial intermediation. Also, the results confirm the potential for inflation to negatively affect financial intermediation. Lastly, the results relating to interest rate spread highlight how high levels of the spread can prevent deep financial intermediation.
- Full Text:
- Date Issued: 2004
Financial liberalization, currency substitution and savings in Nigeria: Evidence from cointegration and error correction modeling
- Aziakpono, Meshach J, Babatope-Obasa, Sanmi
- Authors: Aziakpono, Meshach J , Babatope-Obasa, Sanmi
- Date: 2004
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469837 , vital:77299 , https://hdl.handle.net/10520/EJC31436
- Description: The study set out to test the McKinnon-Shaw proposition that financial liberalization will significantly increase savings mobilization. The results partly supported the financial liberalization proposition. Variables that capture the effects of currency substitution such as the interest rate differential, a proxy for underground economy, the inflation differential (as a measure of macroeconomic instability) and a dummy for political instability were significant in their adverse impacts on the saving mobilization process in Nigeria. We, therefore, advocate for an active monetary policy that will help manage the delicate balance between domestic and foreign interest rates. This should be combined with macroeconomic policies that create a stable economic environment along with appropriate financial and exchange rate policies, in order to discourage economic agents from preferring foreign denominated assets to those held in the domestic currency.
- Full Text:
- Date Issued: 2004
- Authors: Aziakpono, Meshach J , Babatope-Obasa, Sanmi
- Date: 2004
- Subjects: To be catalogued
- Language: English
- Type: text , article
- Identifier: http://hdl.handle.net/10962/469837 , vital:77299 , https://hdl.handle.net/10520/EJC31436
- Description: The study set out to test the McKinnon-Shaw proposition that financial liberalization will significantly increase savings mobilization. The results partly supported the financial liberalization proposition. Variables that capture the effects of currency substitution such as the interest rate differential, a proxy for underground economy, the inflation differential (as a measure of macroeconomic instability) and a dummy for political instability were significant in their adverse impacts on the saving mobilization process in Nigeria. We, therefore, advocate for an active monetary policy that will help manage the delicate balance between domestic and foreign interest rates. This should be combined with macroeconomic policies that create a stable economic environment along with appropriate financial and exchange rate policies, in order to discourage economic agents from preferring foreign denominated assets to those held in the domestic currency.
- Full Text:
- Date Issued: 2004
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