scholarly journals Degree of financialization and energy efficiency in Sub-Saharan Africa: do institutions matter?

2020 ◽  
Vol 6 (1) ◽  
Author(s):  
Philip Kofi Adom ◽  
Franklin Amuakwa-Mensah ◽  
Salome Amuakwa-Mensah
Keyword(s):  
Economic Growth ◽  
Energy Efficiency ◽  
Banking Sector ◽  
Developing Economies ◽  
Generalized Method Of Moments ◽  
Energy Utilization ◽  
Sub Saharan Africa ◽  
Political Regimes ◽  
Growth Strategies ◽  
Bank Profitability

Abstract The United Nations Sustainable Development Goal 7 emphasizes the need for economies around the world to double their efforts in energy efficiency improvements. This is because improvements in energy efficiency can trigger economic growth and considered as one of the ‘green’ growth strategies due to its carbon free content. To this end, some empirical studies have investigated the nexus between economic growth and energy efficiency, but the effects of the latter on financial indicators have not been sufficiently studied in the literature, at least in developing economies like Africa. This study examines the effect of energy efficiency improvements on commercial bank profitability under different political regimes (i.e., autocratic and democratic political regimes); something previous literature had neglected. The study uses panel data, consisting of 43 African countries and the simultaneous System Generalized Method of Moments. We found that energy efficiency improvement is more likely to induce higher bank profitability in political institutions with the characteristics of centralization of power compared with those with decentralization of power. Furthermore, for the banking sector, the findings suggest that energy utilization behavior of clients should be included in the loan or credit valuation process. For the government, the agenda of energy efficiency should be aggressively pursued while taking cognizance of creating a political environment that weans itself from a ‘grandfathering’ behavior.

scholarly journals Determinants of Profitability in the Banking Sector: An Analysis of Post-Soviet Countries

Economies ◽  
2018 ◽  
Vol 6 (3) ◽  
pp. 41 ◽  
Author(s):  
Serhat Yüksel ◽  
Shahriyar Mukhtarov ◽  
Elvin Mammadov ◽  
Mustafa Özsarı
Keyword(s):  
Economic Growth ◽  
Financial Performance ◽  
Credit Card ◽  
Fixed Effects ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Negative Relationship ◽  
Annual Data ◽  
Bank Profitability ◽  
Interest Income

The purpose of this paper is to identify the determinants of bank profitability in 13 post-Soviet countries. Within this scope, annual data between 1996 and 2016 is analyzed by using fixed effects panel regression and the Generalized Method of Moments (GMM). It is concluded that loan amount, non-interest income and economic growth are significant indicators of profitability. Moreover, the 2008 global mortgage crisis has a negative influence on bank profitability in post-Soviet countries. According to the estimation results, there is a positive relationship between non-interest income and economic growth with profitability. This result shows that when non-interest income of the banks increases, such as credit card fees and commission, it affects the financial performance of the banks, positively, and contributes to bank profitability. Another result of this study is that economic growth positively influences bank profitability. This result allows us to conclude that higher GDP comes with higher bank profitability for post-Soviet countries. Lastly, there is a negative relationship between loan-to-GDP ratio and profitability of the banks in post-Soviet countries. This means that when the ratio of total loans to GDP increases, it affects financial performance of the banks in a negative way. While considering this result, it is recommended that banks in post-Soviet countries should focus on ways to increase their non-interest income. Additionally, it is also significant for these banks to be careful and risk averse when lending to their customers.

Assessing the bank profitability in the MENA region

2014 ◽  
Vol 7 (3) ◽  
pp. 305-332 ◽  
Author(s):  
Rim Ben Selma Mokni ◽  
Houssem Rachdi
Keyword(s):  
Method Of Moments ◽  
North Africa ◽  
Banking Sector ◽  
Middle Eastern ◽  
Generalized Method Of Moments ◽  
Mena Region ◽  
Bank Profitability ◽  
Content Type ◽  
Conventional Banks ◽  
Econometric Technique

Purpose – Which of the banking stream is relatively more profitable in Middle Eastern and North Africa (MENA) region? Design/methodology/approach – The empirical study covers a sample of 15 conventional and 15 Islamic banks for the period 2002-2009.The authors estimate models using the generalized method of moments in system, of Blundell and Bond (1998). They exploit an up-to-date econometric technique which takes into consideration the issue of endogeneity of regressors to evaluate the comparative profitability of Islamic and conventional banks in the MENA region. Findings – Empirical analysis results show that the determinants’ significance varies between Islamic and conventional banks. Profitability seems to be quite persistent in the MENA region reflecting a higher degree of government intervention and may signal barriers to competition. Originality/value – The main interest is to develop a comprehensive model that integrates macroeconomic, industry-specific and bank-specific determinants. The paper makes comparison of the performance between two different banking systems in the MENA region. The authors consider a variable crisis to gain additional insights into the impacts of the financial crisis on MENA banking sector.

Economic freedom, competition and bank stability in Sub-Saharan Africa

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Emmanuel Sarpong-Kumankoma ◽  
Joshua Yindenaba Abor ◽  
Anthony Q. Q. Aboagye ◽  
Mohammed Amidu
Keyword(s):  
Economic Freedom ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Sub Saharan Africa ◽  
Bank Stability ◽  
Content Type ◽  
Show Evidence ◽  
Negative Effect ◽  
Sub Saharan ◽  
The Stability

PurposeThis study aims to analyze the potential implications of economic freedom and competition for bank stability.Design/methodology/approachUsing system generalized method of moments and data from 139 banks across 11 Sub-Saharan African (SSA) countries during the period 2006–2012, this study considers whether the degree of economic freedom affects the relationship between competition and bank stability.FindingsThe results show evidence of the competition-fragility hypothesis in SSA banking, but suggests that beyond a setting threshold, increases in market power may also be damaging to bank stability. Financial freedom has a negative effect on bank stability, suggesting that banks operating in environments with greater financial freedom generally tend to be less stable or more risky. The authors also find evidence of a conditional effect of economic freedom on the competition–stability relationship, implying that bank failure is more likely to occur in countries with greater economic freedom, but with low competition in the banking sector.Practical implicationsThe results suggests to policy makers that a moderate level of competition and economic freedom may be the appropriate policy to ensure the stability of banks.Originality/valueThe study provides insight on the competition–bank stability relationship, by providing new empirical evidence on the effect of economic freedom, which has not been previously considered.

Innovation, institutions and economic growth in sub-Saharan Africa – an IV estimation of a panel threshold model

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Joseph Ato Forson ◽  
Rosemary Afrakomah Opoku ◽  
Michael Owusu Appiah ◽  
Evans Kyeremeh ◽  
Ibrahim Anyass Ahmed ◽  
...  
Keyword(s):  
Economic Growth ◽  
Developing Economies ◽  
Innovation Policy ◽  
Threshold Model ◽  
Sub Saharan Africa ◽  
Content Type ◽  
Panel Regressions ◽  
Sub Saharan ◽  
The Impact ◽  
The Relationship

PurposeThe significant impact of innovation in stimulating economic growth cannot be overemphasized, more importantly from policy perspective. For this reason, the relationship between innovation and economic growth in developing economies such as the ones in Africa has remained topical. Yet, innovation as a concept is multi-dimensional and cannot be measured by just one single variable. With hindsight of the traditional measures of innovation in literature, we augment it with the number of scientific journals published in the region to enrich this discourse.Design/methodology/approachWe focus on an approach that explores innovation policy qualitatively from various policy documents of selected countries in the region from three policy perspectives (i.e. institutional framework, financing and diffusion and interaction). We further investigate whether innovation as perceived differently is important for economic growth in 25 economies in sub-Saharan Africa over the period 1990–2016. Instrumental variable estimation of a threshold regression is used to capture the contributions of innovation as a multi-dimensional concept on economic growth, while dealing with endogeneity between the regressors and error term.FindingsThe results from both traditional panel regressions and IV panel threshold regressions show a positive relationship between innovation and economic growth, although the impact seems negligible. Institutional quality dampens innovation among low-regime economies, and the relation is persistent regardless of when the focus is on aggregate or decomposed institutional factors. The impact of innovation on economic growth in most regressions is robust to different dimensions of innovation. Yet, the coefficients of the innovation variables in the two regimes are quite dissimilar. While most countries in the region have offered financial support in the form of budgetary allocations to strengthen institutions, barriers to the design and implementation of innovation policies may be responsible for the sluggish contribution of innovation to the growth pattern of the region.Originality/valueSegregating economies of Africa into two distinct regimes based on a threshold of investment in education as a share of GDP in order to understand the relationship between innovation and economic growth is quite novel. This lends credence to the fact that innovation as a multifaceted concept does not take place by chance – it is carefully planned. We have enriched the discourse of innovation and thus helped in deepening understanding on this contentious subject.

Effect of Infrastructure and Foreign Direct Investment on Economic Growth in Sub-Saharan Africa

2019 ◽  
Vol 11 (3) ◽  
pp. 183-201 ◽  
Author(s):  
Edward Nketiah-Amponsah ◽  
Bernard Sarpong
Keyword(s):  
Economic Growth ◽  
Foreign Direct Investment ◽  
Direct Investment ◽  
Multinational Enterprises ◽  
Generalized Method Of Moments ◽  
Business Environment ◽  
Transport Infrastructure ◽  
Sub Saharan Africa ◽  
Economic Infrastructure ◽  
Sub Saharan

This article investigates the effect of infrastructure and foreign direct investment (FDI) on economic growth in Sub-Saharan Africa (SSA) using panel data on 46 countries covering the period 2003–2017. The data were analyzed using fixed effects, random effects, and system generalized method of moments (GMM) estimation techniques. Based on the system GMM estimates, the results indicate that a 1 percent improvement in electricity and transport infrastructure induces growth by 0.09 percent and 0.06 percent, respectively. Additionally, FDI proved to be growth enhancing only when interacted with infrastructure. The interactive effect of FDI and infrastructure improves economic growth by 0.016 percent. The results suggest that public provision of economic infrastructure reduces the cost of production for multinational enterprises, thus providing an incentive to increase investment in the domestic economy to sustain economic growth. The results also suggest that the impact of FDI on economic growth is maximized when some level of economic infrastructure is available. Our findings thus provide ample justification on the need for a significant government investment in infrastructure to provide a less costly business environment for both local and multinational enterprises to improve economic growth.

scholarly journals The impact of stock market development on economic growth: A GMM approach

2021 ◽  
Vol 18 (3) ◽  
pp. 74-81
Author(s):  
Toan Ngoc Bui ◽  
Thu-Trang Thi Doan
Keyword(s):  
Economic Growth ◽  
Stock Market ◽  
Capital Accumulation ◽  
Developing Economies ◽  
Positive Impact ◽  
Generalized Method Of Moments ◽  
The Philippines ◽  
Market Development ◽  
Stock Market Development ◽  
The Impact

This study investigated the impact of stock market development (SMD) on economic growth (EG) among emerging markets and developing economies (EMDEs) in Asia. The data sample includes eight Asian EMDEs (China, Indonesia, India, Sri Lanka, Malaysia, the Philippines, Thailand, and Vietnam) from 2008 to 2019. These countries share several similarities, so this ensures reliability of the results. Regarding the analysis, the generalized method of moments (GMM) is used for the estimation. The results show that SMD exerts a positive impact on EG. This finding confirms the importance of SMD in improving efficient capital accumulation and allocation, and also allows investors to reduce risks and increase liquidity, which will boost EG. Further, the significant influence of domestic credit (DC), control of corruption (CC), and inflation (INF) on EG is also highlighted. These findings are valuable empirical evidence that greatly contributes to reinforcing the suitability of classical economic growth theories, especially the theory of endogenous growth. They are also essential to EMDEs in Asia. Accordingly, the EMDEs should develop effective policies to improve the stock market’s scale, which contributes substantially to the development of EG. Moreover, these economies need to pursue many appropriate policies in sync, such as stimulating SMD, improving governance effectiveness and implementing effective macroeconomic policies. Acknowledgment This study was funded by the Industrial University of Ho Chi Minh City (IUH), Vietnam (grant number: 21/1TCNH01).

scholarly journals THE EFFECT OF HUMAN CAPITAL ON ECONOMIC GROWTH IN SOME SUB SAHARA AFRICAN COUNTRIES (SSA)

2021 ◽  
Vol 5 (1) ◽  
pp. 1-24
Author(s):  
AISHA AHMAD SAJOH
Keyword(s):  
Economic Growth ◽  
Human Capital ◽  
Data Base ◽  
Generalized Method Of Moments ◽  
Sub Saharan Africa ◽  
Unique Contribution ◽  
African Countries ◽  
Sub Saharan ◽  
Table Data ◽  
The Impact

Purpose: This research looked into debate on the possible impact of human capital on economic growth in Sub-Saharan Africa (SSA) and considers two alternative measures of human capital: health and education. Methodology: The research used a dynamic model based on the system generalized method of moments (SGMM) and analysed a balanced panel data covering 35 countries from 1986–2018. The research used Microsoft excel to record all the data gotten from the world indicator data base from world bank, penn world table data base and CANA database. The analysis was presented in a tabular form. Findings: This study found that human capital has an overall positive and statistically significant impact on economic growth in the SSA region, although, democracy has a negative and statistically significant impact on economic growth in the region. This finding shows the importance of both measures of human capital and aligns with the argument in the literature that neither education nor health is a perfect substitute for the other as a measure of human capital. Unique contribution to theory, practice and policy:Generally, the finding emphasised that both education and health measures of human capital are important, and that policymakers must consider the level of economic development while formulating policies that can enhance the impact of human capital on economic growth in the Sub-Saharan Africa region.

scholarly journals Do Profitable Banks Make a Positive Contribution to the Economy?

2020 ◽  
Vol 13 (8) ◽  
pp. 159 ◽  
Author(s):  
Vijay Kumar ◽  
Ron Bird
Keyword(s):  
Economic Growth ◽  
Banking Sector ◽  
Negative Impact ◽  
Asia Pacific ◽  
Positive Contribution ◽  
Pacific Region ◽  
Asia Pacific Region ◽  
Bank Profitability ◽  
Developed Economies ◽  
The Impact

A number of studies have investigated the relationship between financial sector development and economic growth; however, the impact of bank profitability on economic growth is still unclear. We investigate the link between bank profitability and economic growth in the Asia-Pacific region over the period 2004–2014. Using the system GMM estimator, our findings suggest that a profitable banking sector is a prerequisite for economic growth in the Asia-Pacific region and that the impact of bank profitability on economic growth is more prominent in small banking sectors. Perhaps surprisingly, we found that the bank size has a negative impact on GDP growth, with the influence of bank profitability on economic growth reducing as the size of the banking sector increases. Our results also show that the impact of profitability on economic growth is much larger in developed economies compared to small emerging and large emerging economies.

Macroeconomic Risk and Political Stability: Perspectives from Emerging and Developing Economies

2021 ◽  
pp. 097215092110476
Author(s):  
Rexford Abaidoo ◽  
Elvis Agyapong
Keyword(s):  
Rule Of Law ◽  
Developing Economies ◽  
Generalized Method Of Moments ◽  
Political Stability ◽  
Output Growth ◽  
Sub Saharan Africa ◽  
Coefficient Estimates ◽  
Macroeconomic Risk ◽  
Empirical Estimates ◽  
The Impact

This study examines the impact of macroeconomic risk on political stability, using data compiled from 38 countries in the sub-region of sub-Saharan Africa (SSA), from 1996 to 2018. Macroeconomic risk index employed in this study is constructed using principal component analysis (PCA) from key economic variables. Empirical estimates verifying the relationship in question are conducted using the two-step system generalized method of moments (TS-SGMM) estimation technique. Presented empirical estimates suggest that macroeconomic risk has an adverse impact on political stability, all things being equal. Reported coefficient estimates further suggest that improvement in rule of law among economies in the sub-region significantly moderates the negative impact exerted on the political environment by macroeconomic risk. Coefficient estimates additionally suggest that improvement in governance and institutional variables (corruption control, government effectiveness, regulatory quality and rule of law) augment efforts at promoting political stability even in an environment characterized by volatile output growth.

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