Legal and accounting reform that strengthens creditor rights, contract enforcement, and accounting practices boosts financial development and accelerates economic growth. Levine, Loayza, and Beck evaluate: Whether the level of development of financial intermediaries exerts a casual influence on economic growth. Whether cross-country differences in legal and accounting systems (such as creditor rights, contract enforcement, and accounting standards) explain differences in the level of financial development. Using both traditional cross-section, instrumental-variable procedures and recent dynamic panel techniques, they find that development of financial intermediaries exerts a large causal impact on growth. The data also show that cross-country differences in legal and accounting systems help determine differences in financial development. Together, these findings suggest that legal and accounting reform that strengthens creditor rights, contract enforcement, and accounting practices boosts financial development and accelerates economic growth. This paper - a product of Macroeconomics and Growth, Development Research Group - is part of a larger effort in the group to understand the links between the financial system and economic growth. Thorsten Beck may be contacted at tbeck@worldbank.org.

Financial Intermediation and Growth: Causality and Causes

http://faculty.haas.berkeley.edu/ross_levine/Papers/2000_JME_Fin%20Int%20Growth%20Causality.pdf

Financial intermediation and growth: Causality and causes ☆

Why are politicians able to form electoral coalitions that bridge ethnic divisions in some countries and not others? This book answers this question by presenting a theory of pecuniary coalition building in multi-ethnic countries governed through patronage Focusing on sub-Saharan Africa, the book explains how the relative autonomy of business from state-controlled capital affects political bargaining among opposition politicians in particular While incumbents form coalitions by using state resources to secure cross-ethnic endorsements, opposition politicians must rely on the private resources of business to do the same This book combines cross-national analyses of African countries with in-depth case studies of Cameroon and Kenya to show that incumbents actively manipulate financial controls to prevent business from supporting their opposition It demonstrates that opposition politicians are more likely to coalesce across ethnic cleavages once incumbents have lost their ability to blackmail the business sector through financial reprisals

Multi-Ethnic Coalitions in Africa: Business Financing of Opposition Election Campaigns

This study investigates the impact of financial sector reforms on interest rate spreads in the commercial banking system in Malawi The financial reform program commenced in 1989 when both the Reserve Bank Act and the Banking Act were revised with the easing of entry requirements into the banking system, and indirect monetary policy instruments were subsequently introduced in 1990 The adoption of a floating exchange rate in 1994 marked the end of major policy reforms in the Malawian financial sector Using alternative definitions of spreads, our analysis shows that spreads increased significantly following liberalization, and panel regression results suggest that the observed high spreads can be attributed to high monopoly power, high reserve requirements, high central bank discount rate and high inflation

Financial Reforms and Interest Rate Spreads in the Commercial Banking System in Malawi

The financial turmoil of the late 1990s prompted a broad search for tools and techniques for detecting and preventing financial crises, and more recent episodes of instability have highlighted the importance of continuous monitoring of financial systems as a tool for preventing crises. This paper looks at the development of measures of financial sector soundness and of methods to analyze them. The authors propose two sets of financial soundness indicators that are considered useful for periodic monitoring, and for compilation and dissemination efforts by national authorities. They highlight the substantial advance made in recent years in measuring and analyzing financial soundness indicators, and specify areas where more work is needed.

Financial Soundness Indicators: Analytical Aspects and Country Practices

This study takes stock of progress made so far in the financial sectors of sub-saharan African countries. It recommends further reforms and specific measures in the areas of supervision, development of monetary operations and financial markets, external sector liberalization, central bank autonomy and accountability, payments system, and central bank accounting and auditing.

Financial Sector Development in Sub-Saharan African Countries

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Financial Sector Development in Sub-Saharan African Countries