Financial liberalization and growth in African economies: The role of policy complementarities

This paper examines whether the effect of financial liberalization on economic growth depends on reform complementarities. A non-linear growth regression specification that interacts a proxy of financial liberalization with proxies of reform complementarities is estimated using a panel of 45 Sub-Saharan Africa (SSA) countries. The cross-country, panel-data evidence shows no clear relationship between financial liberalization and growth. The study however finds that financial liberalization is more likely to positively and significantly increase growth across the SSA region if the following complementary reforms are undertaken e.g. improvement in educational attainment, macroeconomic and external stability, and overall governance.