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Deregulation, efficiency and competition in developing banking markets: do reforms really work? A case study for Ghana

journal contribution
posted on 10.01.2019 by John K. Dadzie, Alessandra Ferrari
A key research question that remains largely unanswered especially in the African context is whether the macroeconomic environment and the level of financial development of a country determine the effectiveness of financial reforms. This has important policy implications. We choose Ghana as a case study and carry out an in-depth analysis of its comprehensive set of financial reforms, implemented in the 2000s, which we look at individually. We estimate a stochastic cost frontier to look at efficiency. This is then followed by two different models of competition on the loans market, the main target of the reforms. We find that only the removal of entry restrictions is significant at improving banks efficiency and that private and global foreign, but not regional banks, benefit from it. The results show however no improvements in competition, and reveal instead that macroeconomic and institutional weaknesses continue to exert a negative counterbalancing effect. Reforms need to be anchored on stronger macroeconomic fundamentals, institutional initiatives and generally stronger credit environments for their full potential to be revealed in the context of developing financial markets.

Funding

We would like to thank the Commonwealth Scholarship Commission for the funding provided under their CSFP scheme to support the completion of this project.

History

School

  • Business and Economics

Department

  • Economics

Published in

Journal of Banking Regulation

Citation

DADZIE, J.K. and FERRARI, A., 2019. Deregulation, efficiency and competition in developing banking markets: do reforms really work? A case study for Ghana. Journal of Banking Regulation, In Press.

Publisher

Palgrave Macmillan (part of Springer Nature)

Version

AM (Accepted Manuscript)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

Acceptance date

21/12/2018

Publication date

2019

Notes

This paper is in closed access until 12 months after publication.

ISSN

1745-6452

Language

en

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