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In this empirical paper, we revisit the financial development impact of financial globalization using a panel dataset comprising the OECD countries for the period 1996–2017. We rely on a multidimensional financial development index and the KOF financial globalization index. We find that financial globalization has a positive impact on financial development. Considering the heterogeneity in the conditional distributions of financial development, we also discover that financial globalization favourably impacts financial development across all the conditional distributions (quantiles) albeit with varying magnitude. These findings are robust to the KOF de factoand de juremeasures of financial globalization as well as an alternative measure of financial globalization–financial openness index. more...

This paper examines the effect of foreign direct investment (FDI) on CO2emissions by using disaggregated emissions data; territorial-based and consumption-based emissions. FDI is measured in three ways; inflow, net inflow, and stock. Employing data over the period 1995–2014 and a number of estimators, the results indicate FDI (whether measured as inflow or net inflow) has negative impact on emissions (irrespective of the measurement). However, the impact is generally found to be greater for the territorial-based emissions. The results of the FDI flow variables largely support the pollution halo hypothesis. Thus, the results are supportive of the robust effect of FDI’s positive effect. Regarding the stock measure, the negative effect of FDI is only found for the territorial-based CO2emissions. Since the territorial-based emissions capture emissions in the domestic economy only, it is not surprising that the plausible efficiency of FDI stock is found to reduce these emissions rather the consumption-based. FDI stock is now considered part of the local economy. The results of the paper are largely not parallel with previous studies that did not disaggregate CO2emissions. This we believe is an indication that the measure of CO2matters for the analyses of the FDI-emissions nexus. more...

Bhagwati hypothesis opines that the overall impact of foreign direct investment (FDI) on economic growth is conditioned on countries’ level of integration with the international market. We test this hypothesis for some selected countries in sub-Saharan Africa (SSA). Does this hypothesis hold given our sample evidence? Yes! No! Maybe! We explain why. By invoking the sample splitting and threshold estimation technique, we find that the two measures of openness (trade openness and exports) mediate the FDI-economic growth relationship in three countries and this is an indication of complete Bhagwati hypothesis in these countries. Also, we find that, given the measure of openness, four countries exhibit incomplete Bhagwati hypothesis. Finally, we find no support for the Bhagwati hypothesis for most countries. Based on these findings, we argue that the validity of the Bhagwati hypothesis may be contingent on both country characteristics and the indicator of openness. more...

AbstractBhagwati hypothesis opines that the overall impact of foreign direct investment (FDI) on economic growth is conditioned on countries’ level of integration with the international market. We test this hypothesis for some selected countries in sub-Saharan Africa (SSA). Does this hypothesis hold given our sample evidence? Yes! No! Maybe! We explain why. By invoking the sample splitting and threshold estimation technique, we find that the two measures of openness (trade openness and exports) mediate the FDI-economic growth relationship in three countries and this is an indication of complete Bhagwati hypothesis in these countries. Also, we find that, given the measure of openness, four countries exhibit incomplete Bhagwati hypothesis. Finally, we find no support for the Bhagwati hypothesis for most countries. Based on these findings, we argue that the validity of the Bhagwati hypothesis may be contingent on both country characteristics and the indicator of openness. more...

ABSTRACTEarlier studies on institutions and financial sector development are less informative given their failure to examine how the different forms of institutions influence countries’ level of domestic financial development. In this study, we re-examine the impact of institutions on financial development in the ECOWAS regional bloc over the period 1995–2015. Employing the Augmented Mean Group (AMG) estimator, we show that overall institutions do not have a significant impact on financial development. However, after disaggregating the level of institutions into market-creating, market-legitimizing, market-stabilizing, and market-regulating, we find that only the effect of market-legitimizing institutions significantly enhances financial sector development. Thus, the impact of institutions on financial development is sensitive to the form of institutions. We discuss key implications for policy. more...

We determine the nexus between imports and economic growth for a sample of 26 African countries for the period 1990-2015 within the neoclassical production function framework. We mainly contribute to literature by overcoming the weak theoretical modelling framework and possible model specification bias in most extant studies. Using the Toda-Yamamoto Granger non-causality test, the empirical results indicate that there is absence of causality between imports and economic growth in more than half of the countries in the sample, thus suggesting that neutrality hypothesis is predominant among the countries. We provide ample evidence that causality is absent from imports to economic growth. However, our results should be treated with caution because the absence of causality from imports to economic growth should not imply that imports do not play a role in the growth process of an economy. more...

We examine the impact of macroeconomic factors on stock market development in sub-Saharan Africa. More specifically, we examine the sensitivity of the impact of macroeconomic factors on stock market development to the choice of measure of stock market development. We apply the Feasible Generalised Least Squares (FGLS) estimator on a panel dataset of 12 countries over the period 2000–2015. The empirical results indicate that income, trade openness, financial openness, macroeconomic instability, financial intermediary development, savings, and investment influence stock market development. We provide evidence to suggest that the impact of macroeconomic factors on stock market development is sensitive to the choice of measure of stock market development. The implication of our findings is that the multidimensionality of stock market development should not be jettisoned in making policy prescriptions for stock market development in sub-Saharan Africa. more...

AbstractWe examine the impact of macroeconomic factors on stock market development in sub-Saharan Africa. More specifically, we examine the sensitivity of the impact of macroeconomic factors on stock market development to the choice of measure of stock market development. We apply the Feasible Generalised Least Squares (FGLS) estimator on a panel dataset of 12 countries over the period 2000–2015. The empirical results indicate that income, trade openness, financial openness, macroeconomic instability, financial intermediary development, savings, and investment influence stock market development. We provide evidence to suggest that the impact of macroeconomic factors on stock market development is sensitive to the choice of measure of stock market development. The implication of our findings is that the multidimensionality of stock market development should not be jettisoned in making policy prescriptions for stock market development in sub-Saharan Africa. more...

This study examines the impact of financial risks in form of credit, interest rate and liquidity risk on the profitability of systematically important banks in Nigeria over the period from 2010 to 2016. The fixed effects regression model is estimated with Driscoll–Kraay standard errors in order to produce results that are robust to heteroscedaticity, autocorrelation, cross-sectional dependence and temporal dependence. After controlling for some bank-specific, industry-specific, macroeconomic and institutional factors, the empirical results show that credit and liquidity risks have a positive impact on bank profitability while interest rate does not have an impact. The results are robust to alternative measures of profitability. more...

This study examines the feasibility of international portfolio diversification in the Nigerian stock market. It investigates the relationship between the Nigerian stock market and 5 developed stock markets (US, UK, Japan, Germany and France) in the context of the global financial crisis. The Vector Autoregressive (VAR) Granger causality test results show that the Nigerian stock market and all the developed stock markets are not linked in all the sub-sample periods except the Japanese stock market in the post-crisis period, thus implying that international portfolio diversification is possible in the Nigerian stock markets except Japanese investors in the post-crisis period. Under the full sample period, only the Japanese and German stock markets are not linked to the Nigerian stock market and this indicates international portfolio diversification is feasible for only Japanese and German investors in Nigeria. The Generalized Method of Moments (GMM) regression results indicate that only German and French stock markets have significant impact on the Nigerian stock market in the pre-crisis period, but none of the developed stock markets exert significant impact in the crisis period. In the post-crisis period, only the German stock market is significantly related to the Nigerian stock market. The regression estimates reveal that only the Japanese, German and French stock markets are significantly related to the Nigerian stock market over the full sample period. more...

Extensive research was conducted on the effect of the global financial crisis on stock markets across the globe, but only a limited number focused attention on African stock markets. This study examined the impact of the global financial crisis on emerging stock market behaviour by providing evidence of the efficiency and volatility of the Nigerian stock market across different time periods. The period under review ranges between July 2004 and December 2014. It was sub-divided into the period before the crisis (July 2004–June 2007), the crisis period (July 2007–November 2011), and the period after the crisis (December 2011–December 2014). The generalised ARCH (GARCH) model was built to test for persistence of volatility shocks in the sub-sample periods, while an exponential GARCH (EGARCH) model was developed to determine asymmetry and persistence of volatility in the overall period. The study showed that price is a martingale in all sub-sample periods, except for the pre-crisis period. However, in the overall period, price is not a martingale – suggesting that the Nigerian stock market is not weak form efficient. In addition, there was evidence of long-term persistence in price volatility in the crisis, aftermath and overall periods. Holistically, this study found that the global financial crisis reduced stock prices, but did not have a significant impact on price volatility in the Nigerian stock market. more...

The relationship between stock price and foreign exchange (forex) rate has been a controversial issue over the years. This study examines the nexus between stock prices and forex rates in Nigeria from January 1985 to December 2014. It applies the Johansen co-integration, Toda-Yamamoto Granger non-causality and correlation tests. The empirical results reveal that there is presence of co-integration between stock prices and forex rates and unidirectional causality from forex rates to stock prices with positive correlation. This study did not validate the proposition of the portfolio-balance model in Nigeria but it provides substantiated evidence in favour of the traditional-flow model. more...