TY - JOUR
T1 - The effect of bank market power on economic growth in Africa
T2 - The role of institutions
AU - Idun, Anthony Adu Asare
AU - Aboagye, Anthony Q.Q.
AU - Bokpin, Godfred Alufar
N1 - Publisher Copyright:
© 2020 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license.
PY - 2020/1/1
Y1 - 2020/1/1
N2 - We provide empirical investigations into the role of political institutions in the bank market power-economic growth nexus using country-level data from 44 African countries from 2002 to 2015. We employed a dynamic GMM model to achieve the above objective. The results show that banks with market power in Africa induce economic growth. Also, institutional quality improvement causes positive economic growth and improves the degree with which banks with market power influence economic growth. The influence of institutional quality on economic growth, however, varies depending on specific institutional factors even when we differentiated the effect of the level of bank market power. In West Africa, banks with market power induce economic growth, but the less competitive nature in the banking environment of the other sub-regions discourages economic growth. The results call for policy directions that improve economic and political institutions towards improving effective intermediation in Africa. In West Africa, the Central Banks should come up with regulations targeting large banks with market power to channel funds into productive sectors. In other sub-regions, more competitive banking environments can harness financial resources into productivity growth. The implication is that, regulators and policymakers should implement sound institutional structures that would ensure tailor-made banking system structure to stimulate sustainable economic growth in Africa.
AB - We provide empirical investigations into the role of political institutions in the bank market power-economic growth nexus using country-level data from 44 African countries from 2002 to 2015. We employed a dynamic GMM model to achieve the above objective. The results show that banks with market power in Africa induce economic growth. Also, institutional quality improvement causes positive economic growth and improves the degree with which banks with market power influence economic growth. The influence of institutional quality on economic growth, however, varies depending on specific institutional factors even when we differentiated the effect of the level of bank market power. In West Africa, banks with market power induce economic growth, but the less competitive nature in the banking environment of the other sub-regions discourages economic growth. The results call for policy directions that improve economic and political institutions towards improving effective intermediation in Africa. In West Africa, the Central Banks should come up with regulations targeting large banks with market power to channel funds into productive sectors. In other sub-regions, more competitive banking environments can harness financial resources into productivity growth. The implication is that, regulators and policymakers should implement sound institutional structures that would ensure tailor-made banking system structure to stimulate sustainable economic growth in Africa.
KW - Africa
KW - bank market power
KW - economic growth
KW - institutional quality
KW - regional integration
UR - http://www.scopus.com/inward/record.url?scp=85089147447&partnerID=8YFLogxK
U2 - 10.1080/23322039.2020.1799481
DO - 10.1080/23322039.2020.1799481
M3 - Article
AN - SCOPUS:85089147447
SN - 2332-2039
VL - 8
JO - Cogent Economics and Finance
JF - Cogent Economics and Finance
IS - 1
M1 - 1799481
ER -