African Integration: Financial Market Perspective

African Integration: Financial Market Perspective

Postby Terfa W Abraham » Mon Jul 18, 2011 3:37 pm

Can money or capital market integration within and across regions in Africa enhance Africa's Integration? From the financial crisis of 2007-2009 we learnt that countries that were not integrated with countries that were connected to the financial crisis were free from the effects of the crisis. To this extent, some countries would prefer to be disintegrated than to be integrated. But there are still some benefits from integration. Some have argued that the disappointing outcome in Africa’s growth could be blamed on the small scale of the operations of most African financial systems, but that this deficiency could be corrected through promoting regional financial integration (RFI). They further argue that RFI’s contribution to growth comes through four different channels: (i) it provides stimulus for domestic financial reforms; (ii) it increases the scale of operations and competition, thereby increasing the system’s efficiency and productivity; (iii) it induces foreign direct investment (FDI) inflows; and (iv) it enables the African systems to grow into regional and ultimately global players in financial markets. My argument is that integration is not only beneficial but would also enhance Africa’s integration and financial market integration like stock market integration could serve as a catalyst. The role of stock market to economic growth at country levels however, would be among the determining factors for this argument.
Terfa W Abraham
 
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