What Determines Bond Market Development in Sub-Saharan Africa?
33 Pages Posted: 13 Oct 2009
Date Written: September 2009
Abstract
This study empirically analyzes the determinants of bond market development in a cross section of 23 sub-Saharan African (SSA) countries between 1990 and 2008. It considers the stage of development and the size of the bond market, as well as the historical, structural, institutional and macroeconomic factors driving bond market development in SSA. The study finds that the savings constraint is a key impediment to domestic bond markets development as well as financial market deepening, as it results in a low level of financial intermediation by the banks. Overall, the results show that a confluence of factors matters for the development of domestic bond markets in SSA; these include structure of the economy, investment profile, law and order, size of the banking sector, the level of economic development, and various macroeconomic factors. Policy implications include increased efforts to strengthen the investment environment and the need for a regional approach to bond market development.
Keywords: Access to capital markets, Banking sector, Bond markets, Bonds, Capital markets, Cross country analysis, External debt, Financial institutions, Financial systems, Investment, Nonbank financial sector, Public debt, Savings, Sub-Saharan Africa
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