Spatial externalities, openness and financial development in the SADC

2017-12-10 19:16:10 Viewed: 375 Downloads: 8
  • Spatial externalities, openness and financial development in the SADC

      Alex Bara, Gifty Mugano and Pierre Le Roux

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    Pub: 2017-12-10 19:16:10

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  • This study empirically evaluates spatial externalities in financial development
    in the Southern African Development Community (SADC) in line with
    spatial proximity theory. The study specifically tests whether financially less
    developed economies in SADC benefit from their linkages with and proximity
    to South Africa, a financially developed economy. GMM and Dynamic Fixed
    Effect estimations established that financial development in the SADC is not
    immune to spatial externalities. Results indicate that monetary measures are
    more sensitive to geography than credit. Allowing for spatiality, credit from
    South Africa displays strong positive spatiality under Dynamic Fixed Effects
    but no effect under GMM, possibly responding to crowding-out, South Africa’s
    global linkages and natural flow of credit towards optimal returns. Implicitly,
    the spatial variable has a strong complementary effect in the money market and
    a relatively inconsistent complementary effect in the credit market. Estimations
    that controlled for effects of monetary union in the model also confirm that
    financial development is affected by spatiality in the money market and is less
    responsive to spatial effects in credit. The current level of trade and financial
    openness in SADC is not enough to facilitate financial development in other
    subsectors of the financial sector, beyond money.

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  • Keywords

    Spatial Externalities,Spatiality,Financial Development,SADC


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