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It has been suggested that financial liberalisation may be a key policy to promote industrialisation as it removes the credit access constraint on firms, especially small and medium ones. We investigate the effect of credit expansion in the wake of liberalisation on the structure of the industrial sectors in Malawi and find that, in contrast to the...
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Context 1
... the first experiment we replace our 0-1 financial liberalisation dummy with a graduated 0-1-2 dummy. The results are reported in Tables 4 and 5. Table 4 here Insert Table 5 here The results are a confirmation of those reported in Tables 2 and 3. ...
Context 2
... the first experiment we replace our 0-1 financial liberalisation dummy with a graduated 0-1-2 dummy. The results are reported in Tables 4 and 5. Table 4 here Insert Table 5 here The results are a confirmation of those reported in Tables 2 and 3. The size of the estimated coefficients as well as their significance levels are similar to those in Tables 2 and 3. Indeed, the use of a perhaps more realistic graduated financial liberalisation dummy seems to have improved the significance levels of some of the control variables. ...
Context 3
... size of the estimated coefficients as well as their significance levels are similar to those in Tables 2 and 3. Indeed, the use of a perhaps more realistic graduated financial liberalisation dummy seems to have improved the significance levels of some of the control variables. The results in Tables 4 and 5 confirm the earlier findings that the greater availability of credit following financial liberalisation has resulted in an increase in industrial concentration and a decrease in net firm entry. Moreover, both of these effects are stronger in industrial sectors that are more dependent on external finance. ...
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Citations
... The economic crisis necessitated the application of the International Monetary Fund (IMF)-and World Bank-designed economic restructuring programmes in the shape of Structural Adjustment Program (SAP) in the affected economies by late 1980s to early 1990s (Rajan and Zingales 1998). The main goal of the programmes was to open and develop the financial markets towards fostering industrial development, financial stability, export promotion, trade openness, novelty and competition (Kabango and Paloni 2010). Meanwhile, among the developing regions of the world, sub-Saharan Africa (SSA) is the least industrialized (World Bank 2022), and this has been attributed to several factors, crucial among which is the inadequate access to financial resources which is ideally influenced by the level of financial sector development. ...
Despite the importance of the financial system and quality of institutions to the attainment of economic development goals, the mediating role of institutions in how finance influences the development of the industrial sector across countries has not been given adequate attention in the literature. Therefore, this study assessed the moderating role of institutions in the relationship between finance and industrial development of South Africa for the period 1984–2021. To evaluate the long-run relationship among the variables, the combined cointegration test of Bayer and Hanck was used, while fully modified least squares, dynamic least squares and canonical cointegrating regression were employed to estimate elasticity relationships. The findings of the study revealed that finance impacts industrial development positively in South Africa, but this positive impact is diminished by the quality of institutions in the country. Therefore, the financial system in South Africa needs to be rooted in a high-quality institutional structure for its beneficial impact on the industrial sector to be reinforced for sustainable development. Moreover, there is a need for more reforms in the financial system to promote efficiency that would translate growth in finance into more inclusive growth gains in the industrial sector.
... Such economic downturn compels implementation of key procedural restructurings and market-friendly inducements in the form of Structural Adjustment Program (SAP) by the International Monetary Fund (IMF) and World Bank (WB) during the late 1980s and early 1990s in the crisis-ridden economies (Rajan & Zingales, 1996). The major objective of the reforms was to liberate and develop financial markets focusing on financial stability, competition, novelty, export expansion, industrial development, trade liberalization, and economic stabilization (Kabango & Paloni, 2010). ...
This study examines the impact of governance on industrial growth. Moreover, this study also examines the impact of trade openness, exchange rate, and inflation on industrial growth in the presence of good and bad governance as well as overall governance. For this purpose, data is extracted from the World Development Indicator (WDI) and World Governance Indicator (WGI) of 47 countries of developing economies from 1984 to 2020. Examining the result Generalized Method of Moments (GMM) technique has been applied. The result shows that an increase in governance significantly improves industrial growth. However, trade openness has a significant relation with industrial growth in well governed countries however it deteriorates in bad governed countries. Whereas improvement in trade will deteriorate the industrial growth in the overall and as well as badly governed countries. In the bad governed countries devaluation of exchange rate significantly deteriorates industrial growth in the long run. On the other hand, Inflation significantly improves industrial growth in good as well as badly governed countries. The government needs to improve governance quality, and exchange rate while badly governed countries need to impose high import duties, produce local products to meet the country's needs and provide subsidies to exporting industries.
... There is comprehensive literature on the process of diffusion amid financial development and economic growth. One of these diffusion conduits focuses on the driving role that financial development could play in a country's industrialization course via enhanced access to credit for industries [4]. Meanwhile, different countries/regions have experienced diverse trends in the industrialization process over the years. ...
This study examined the influence of the financial sector on industrialization in Nigeria from 1981 to 2019. Specifically, the study examined the effect of financial sector development on industrialization; and also investigated the influence of industrialization on economic growth of Nigeria. Data were obtained from the Central Bank of Nigeria Statistical Bulletin and the World Development Indicators. The study utilized the Augmented Dickey-Fuller unit root test, Autoregressive Distributed Lag (ARDL) Bounds test for cointegration, and Error Correction Model. The unit root test reported that the variables were stationary at mixed order of levels I(O), and first difference I(1). This necessitated the use of the ARDL Bounds test for levels relationship. The result indicated that financial sector development exerted a negative and significant effect on industrialization in Nigeria; while a negative and significant effect of deindustrialization on economic growth was also observed. The ARDL Bounds test for conintegration validated the existence of a long-run equilibrium relationship between financial sector development and industrialization; and between industrialization and economic growth in Nigeria. The error correction model revealed that 56.98% of the short-run distortions in industrial productivity is corrected annually so that equilibrium is restored in the long-run; while 93.06% of the short-run distortions in economic growth is corrected annually. It was recommended that previous financial sector reforms should be consolidated to make the financial sector robust to support industrialization, which will propel growth in the Nigerian economy.
... Studies reported poor industrial performance in least developed economies (LDC) causing the execution of structural adjustment program (SAP) by IMF and World Bank in developing economies focusing on liberation and development of financial market aiming at economic stabilization, financial globalization, modernization and competition during 1980s and 1990s (Rajan & Zingales, 1996). Moreover, financial openness resulted in removal of financial limitation and expansion of industries across the globe (Kabango & Paloni, 2010). Studies showed that financial reforms played a contributing role in betterment of industrial development and economic growth (Ang & McKibbin, 2007). ...
A better functioning industrial sector matters directly for growth and contributes indirectly to poverty alleviation, unemployment reduction, trade promotion, exchange of goods and services, increased per capital income, GDP growth and so forth. in developed and Least developed countries (LDC). Nonetheless, after global financial crisis and fall of Bretton wood system a new debate was generated to re‐examine the issue after the implementation of financial liberalization policies in different economies. Therefore the present research focuses on examining the predominant determinants of industrial developments for a sample of developed economies and check the comparison between European Union (27 Countries) and United Kingdom. The explicit aim of the present research is to investigate the association between capital account openness (CAO), trade openness (TO), equity openness (EO) and industrial development (IDV) for economies of Europe (EU without UK) and United Kingdom (UK). Time series data set over 1986 to 2017 was employed for empirical analysis. Industrial development was measured by industry value added; KAOPEN as a measure of CAO, TO measured by the ratio of the sum of imports and exports relative to GDP and EO measured by market capitalization divided by GDP. The data sources predominantly included International Financial Statistics and World Development Indicators. Stationarity of data was measured through augmented Dickey–Fuller test, OLS regression was used to examine the association and percentage variation between the study variables. Findings reported only EO and TO as significant predictor of industry development in case of EU. However, EO, TO and CAO does not contribute as a significant determinant in case of United Kingdom. Lastly, the study also explains tremors, subsequent effects and magnitudes, intra‐ and inter‐reliance of constructs under consideration by employing vector auto‐regression (VAR), impulse response function and variance decomposition.
... Studies reported poor industrial performance in least developed economies (LDC) causing the execution of structural adjustment program (SAP) by IMF and World Bank in developing economies focusing on liberation and development of financial market aiming at economic stabilization, financial globalization, modernization and competition during 1980s and 1990s (Rajan & Zingales, 1996). Moreover, financial openness resulted in removal of financial limitation and expansion of industries across the globe (Kabango & Paloni, 2010). Studies showed that financial reforms played a contributing role in betterment of industrial development and economic growth (Ang & McKibbin, 2007). ...
... Financial liberalization was marked by efficient allocation of financial resources, increased competition, high returns on savings, and greater risk diversification (Klein and Olivei 2008). Consequently, financial liberalization policies removed many restrictions causing industries to expand across geographical boundaries and induce industrial sector development (Kabango and Paloni 2010). Greenberg (1997) and Bekaert et al. (2011) narrated positive association between industrial growth and economic growth. ...
A better functioning industrial sector matters directly for growth and contributes indirectly to poverty alleviation, unemployment reduction, trade promotion, exchange of goods and services, increased per capital income, GDP growth etc. in developing and developed economies. Nonetheless, after global financial crisis and fall of Bretton wood system a new debate was generated to re-examine the issue after the implementation of financial liberalization policies in these economies. Therefore, the central theme of this study is to test the industrial development nexus in United States of America, European Union and China. With this background in mind the present research aims to ascertain whether financial liberalization in terms of capital account openness (CAO), trade openness (TO), equity openness (EO), Regulatory factors in terms of World Governance indicator, private sector investment, public sector investment and lastly whether macroeconomic factors in terms of exchange rate (ER) and foreign direct investment (FDI) have had any impact on industrial development. Augmented dicker fully test was applied to estimate stationarity of data, vector auto regression, impulse response function and variance decomposition were used to describe shocks, after effects and magnitudes and intra and inter dependence of the study variables. EO, TO and FDI were significant determinants in European Union. However, Governance, TO and CAO are significant predictors in China and Lastly Governance, ER, FDI, private investment and public investment were significant in United States of America.
... The main agenda was to liberate and develop financial market for achieving the ultimate goal of economic stability, competition, innovation and financial globalization during 1980s and 1990s. However, after financial openness, many restrictions were taken out and industries were expanded across geographical boundary of home country (Kabango and Paloni 2010). Ang and McKibbin (2007) emphasized that financial restructuring contributed favorably in stimulating industrial sector development which result in overall economic growth. ...
The main prospective of this research is to analysis the industrial development (IDV) nexus for a sample of Pre Brexit Polling and After Brexit Polling in the economy of United Kingdom. The prevalence of structural, political and institutional instabilities in the region under study makes it important to study from a policy perspective. The specific objective of the current study is to check the nature of relationship between capital account openness, trade openness, equity openness and IDV for Pre Brexit Polling and After Brexit Polling in United Kingdom. The current study utilized time series data set for Pre-Brexit analysis data from May 1, 2014 to June 23, 2016 and Post-Brexit analysis data from June 24, 2016 to May 1, 2018. Initially multiple regression methods was applied and in next step VAR, Impulse response function and Variance decomposition has been applied for describing shocks, quantifying shocks and explaining intra and inter dependencies respectively. Results showed that Financial openness policies and macroeconomic policies should be totally reformulated and redesigned as the previously followed policies does not contributed in IDV in Pre Brexit Polling and Post Brexit Polling in United Kingdom.
... The main agenda was to liberate and develop financial market for achieving the ultimate goal of economic stability, competition, innovation and financial globalization during 1980s and 1990s. However, after financial openness, many restrictions were taken out and industries were expanded across geographical boundary of home country (Kabango and Paloni 2010). Ang and McKibbin (2007) emphasized that financial restructuring contributed favorably in stimulating industrial sector development which result in overall economic growth. ...
The main prospective of this research is to analysis the industrial development (IDV) nexus for a sample of Pre Brexit Polling and After Brexit Polling in the economy of United Kingdom. The prevalence of structural, political and institutional instabilities in the region under study makes it important to study from a policy perspective. The specific objective of the current study is to check the nature of relationship between capital account openness, trade openness, equity openness and IDV for Pre Brexit Polling and After Brexit Polling in United Kingdom. The current study utilized time series data set for Pre-Brexit analysis data from May 1, 2014 to June 23, 2016 and Post-Brexit analysis data from June 24, 2016 to May 1, 2018. Initially multiple regression methods was applied and in next step VAR, Impulse response function and Variance decomposition has been applied for describing shocks, quantifying shocks and explaining intra and inter dependencies respectively. Results showed that Financial openness policies and macroeconomic policies should be totally reformulated and redesigned as the previously followed policies does not contributed in IDV in Pre Brexit Polling and Post Brexit Polling in United Kingdom.
... Although, Malawi implemented financial reforms starting from 1987 under the structural adjustment programmes supported by the International Monetary Fund (IMF) and the World Bank, empirical work testing the effect of these reforms on aggregate consumption which forms 90% of gross domestic product (GDP) has not been investigated. The only studies well documented in the literature include the effects of financial liberalisation i on savings; on the banking industry; other industries and firms; monetary policy and formal and informal financial markets (Chirwa and Mlachila, 2004;Kabango and Paloni, 2010;Ngalawa and Viegi, 2010). ...
... While there is a vast theoretical and empirical literature on the links between financial sector development and economic growth that emerged from the debate of Mckinnon (1973) and Shaw (1973) on financial intermediation and economic growth, not much has been done to examine the links between financial development and industrial growth.There is also an extensive literature on the transmission mechanism between financial development and economic growth. One of these transmission channels centers on the driving role that financial development could play in a country's industrialization process through improved access to credit for industries (Kabango & Paloni, 2011). ...
This paper examines the long run and causal relationship between financial sector development and industrialization in Nigeria for the period 1981 to 2011 using time series data. Results from a multivariate VAR and vector error correction model provide evidence of long run relationship between financial sector development and industrialization in Nigeria. The two measures of financial development had contrasting effects on industrial output. Ratio of private sector bank credit to GDP has a positive relationship with industrial output while the ratio of broad money stock to GDP has a negative relationship with industrial output. Granger causality test reveals long-run unidirectional causal link running from industrialization to financial development. There is therefore the urgent need for government to consolidate on past financial sector reforms to address the challenges of financial intermediation in the domestic financial sector to improve loan disbursement to the industrial sector of the Nigerian economy.
