The Impact of Financial Liberalization on the Economic Growth of Ethiopia: A Panel Data Approach
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Date
2012-06
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A.A.U
Abstract
This paper attempts to evaluate the impact of financial liberalization on
the banking sector performance and economic growth of Ethiopia ,
using annual data covering the period 2004-2011. The Housman test for
the random effects regressions is imposed by the RE estimation are
valid and the repressors are, uncorrelated with the bank random effect
estimator, consistent and efficient. The findings of the study showed that
there is a small performance gap between private and public banks.
Therefore, if foreign banks were permitted to enter the Ethiopian
banking system the result might be the narrowing of the efficiency gap,
measured by cost-asset ratio, the interest-rate spread and ROA between
public and private banks. However, this might not be creating positive
effects on Ethiopia's national economic growth. Because oreign banks
with more capital and more experience will take over the domestic
financial sector, which is presently, lead by banks that are too small,
young and inexperienced to compete.
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Keywords
Financial liberalization, bank performance, ROA