Interaction of Formal and Informal Financial Markets in Quasi-Emerging Market Economies (original) (raw)

The characteristics of informal financial markets in Sub-Saharan Africa

Journal of African Economies, 2009

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The Role of Formal and Informal Finance in Economic Development

Journal of Economics, Finance And Management Studies, 2021

There is an apparent assumption amongst policymakers despite evidence of heavy and increasing reliance on informal finance, the co-existence of formal and informal financial markets, and linkages between informal finance and economic outcomes that, formal rather than informal finance, is needed for economic development. The objective of this study is to examine the role of formal and informal finance in Economic Development. We use White Heteroscedasticity Adjusted and Two-Stage Least Squares Regression for the estimation, with measures of the regulatory framework for protecting financial consumers as instruments. We find that, while access to formal financial services has a positive effect on economic development irrespective of a country’s income status, access to informal financial services may positively or negatively affect economic development depending on its source. Further, while formal finance on economic development is positive irrespective of a country’s level of develop...