Abstract
The study evaluates the effects of global/international finance on financial development, as well as analyse the options for enhancing the flow of global finance, in the Southern Africa Development Community (SADC) region. The study is motivated by the seemingly disconnection between global finance and international financial centres and financial development in the SADC region. The study uses a cross-country dynamic panel model, and estimations established that countries with international financial centres contribute nearly double to pooled financial development in the SADC when compared to countries without. It was also established that global finance that is currently received by SADC countries has no effect on financial development in these counties. The study recommends strategies through which South Africa, a globally connected country, could link other SADC countries to global financial markets and help in driving the development of financial systems in these countries. Key words: Financial development, global finance, international financial centres, Southern Africa Development Community (SADC).
Highlights
Financial sectors of countries are directly and indirectly affected by global financial developments
The results show that the coefficients for dummy variables for financial centres are all positive and significant, indicative of a positive effect of international financial centres on financial development
This study reviewed the role of global finance and international financial centres on financial development in Southern African Development Community (SADC)
Summary
Financial sectors of countries are directly and indirectly affected by global financial developments. The region has four countries, Botswana, Mauritius, South Africa and Seychelles that have international financial centres. Among these centres, South Africa and Mauritius are rated among the world’s global financial centres and are two of the only three rated in Africa (Global Financial Centres Index, 2015). South Africa is a member of the BRICS (Brazil, Russia, India, China and South Africa) countries, which is a global economic zone of emerging economies that has global influence. This bloc has already made strides in financial development by establishing a development bank, the New Development
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