Please use this identifier to cite or link to this item:
Title: Why Do African Banks Lend so Little?
Authors: Andrianova, Svetlana
Baltagi, Badi H.
Demetriades, Panicos O.
Fielding, David
First Published: Mar-2011
Publisher: Dept. of Economics, University of Leicester
Abstract: We put forward a plausible explanation of African financial under-development in the form of a bad credit market equilibrium. Utilis- ing an appropriately modified IO model of banking, we show that the root of the problem could be unchecked moral hazard (strategic loan defaults) or adverse selection (a lack of good projects). Applying a dynamic panel estimator to a large sample of African banks, we show that loan defaults are a major factor inhibiting bank lending when the quality of regulation is poor. We also find that once a threshold level of regulatory quality has been reached, improvements in the default rate or regulatory quality do not matter, providing support for our theoretical predictions.
Series/Report no.: Papers in Economics;11/19
Type: Report
Appears in Collections:Reports, Dept. of Economics

Files in This Item:
File Description SizeFormat 
dp11-19.pdf257.57 kBAdobe PDFView/Open

Items in LRA are protected by copyright, with all rights reserved, unless otherwise indicated.