Skip to main content
×
×
Home

Financial development and prehistoric geographical isolation: global evidence

  • Oasis Kodila-Tedika (a1), Simplice A. Asongu (a2), Matthias Cinyabuguma (a3) and Vanessa S. Tchamyou (a4)
Abstract

Using cross-country differences in the degree of isolation before the advent of technologies in sea and air transportation, we assess the relationship between geographical isolation and financial development across the globe. We find that prehistoric geographical isolation has been beneficial to development because it has contributed to contemporary cross-country differences in financial intermediary development. The relationship is robust to alternative samples, different estimation techniques, outliers and varying conditioning information sets. The established positive relationship between geographical isolation and financial intermediary development does not significantly extend to stock market development.

  • View HTML
    • Send article to Kindle

      To send this article to your Kindle, first ensure no-reply@cambridge.org is added to your Approved Personal Document E-mail List under your Personal Document Settings on the Manage Your Content and Devices page of your Amazon account. Then enter the ‘name’ part of your Kindle email address below. Find out more about sending to your Kindle. Find out more about sending to your Kindle.

      Note you can select to send to either the @free.kindle.com or @kindle.com variations. ‘@free.kindle.com’ emails are free but can only be sent to your device when it is connected to wi-fi. ‘@kindle.com’ emails can be delivered even when you are not connected to wi-fi, but note that service fees apply.

      Find out more about the Kindle Personal Document Service.

      Financial development and prehistoric geographical isolation: global evidence
      Available formats
      ×
      Send article to Dropbox

      To send this article to your Dropbox account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Dropbox.

      Financial development and prehistoric geographical isolation: global evidence
      Available formats
      ×
      Send article to Google Drive

      To send this article to your Google Drive account, please select one or more formats and confirm that you agree to abide by our usage policies. If this is the first time you use this feature, you will be asked to authorise Cambridge Core to connect with your <service> account. Find out more about sending content to Google Drive.

      Financial development and prehistoric geographical isolation: global evidence
      Available formats
      ×
Copyright
Corresponding author
S. A. Asongu (corresponding author), African Governance and Development Institute, PO Box 8413, Yaoundé, Cameroon; Department of Economics and Development Studies, Covenant University, Ota, Ogun State, Nigeria; and Development Finance Centre, Graduate School of Business, University of Cape Town, Cape Town, South Africa; e-mail: asongusimplice@yahoo.com.
Footnotes
Hide All

We thank James B. Ang, who supplied us most of the data used in this research. We are also grateful to the journal's anonymous referees for their helpful comments and suggestions. The usual disclaimer applies.

Footnotes
References
Hide All
Aghion, P. and Bolton, P. (1992). An incomplete contracts approach to financial contracting. Review of Economic Studies, 59(3), pp. 473–94.
Aizenman, J. and Glick, R. (2009). Sterilization, monetary policy, and global financial integration. Review of International Economics, 17(4), pp. 777801.
Alesina, A., Devleeschauwer, A., Easterly, W., Kurlat, S. and Wacziarg, R. (2003). Fractionalization. Journal of Economic Growth, 8(2), pp. 155–94.
Ang, J. B. (2013). Are modern financial systems shaped by state antiquity? Journal of Banking and Finance, 37(11), pp. 4038–58.
Ang, J. B. and Kumar, S. (2014). Financial development and barriers to the cross-border diffusion of financial innovation. Journal of Banking and Finance, 39(February), pp. 4356.
Ashraf, Q., Özak, O. and Galor, O. (2010). Isolation and development. Journal of the European Economic Association, 8(2–3), pp. 401–12.
Asongu, S. A. (2012a). Government quality determinant of stock market performance in African countries. Journal of African Business, 13(3), pp. 183–99.
Asongu, S. A. (2012b). Law and finance in Africa. Brussels Economic Review, 55(4), pp. 385408.
Asongu, S. A. (2013). Globalization and Africa: implications for human development. International Journal of Development Issues, 12(3), pp. 213–38.
Asongu, S. A. (2014). Financial development dynamic thresholds of financial globalisation: evidence from Africa. Journal of Economics Studies, 41(2), pp. 166–95.
Asongu, S. A. and De Moor, L. (2017). Financial globalisation dynamic thresholds for financial development: evidence from Africa. European Journal of Development Research, 29(1), pp. 192212.
Asongu, S. A. and Nwachukwu, J. C. (2017). Recent finance advances in information technology for inclusive development: a survey. African Governance and Development Institute Working Paper no. 17/009, Yaoundé.
Azzimonti, M., De Francisco, E. and Quadrini, V. (2014). Financial globalisation, inequality and the rising public debt. American Economic Review, 104(8), pp. 2267–302.
Baltagi, B. H., Demetriades, P. and Law, S. H. (2009). Financial development and openness: evidence from panel data. Journal of Development Economics, 89(2), pp. 285–96.
Batuo, M. E. and Asongu, S. A. (2015). The impact of liberalisation policies on income inequality in African countries. Journal of Economic Studies, 42(1), pp. 68100.
Becerra, O., Cavallo, E. A. and Scartascini, C. (2012). The politics of financial development: the role of interest groups and government capabilities. Journal of Banking and Finance, 36(3), pp. 626–43.
Beck, T., DEMIRGÜÇ-Kunt, A. and Levine, R. (2003). Law, endowments, and finance. Journal of Financial Economics, 70(2), pp. 137–81.
Beck, T., Demirgüç-Kunt, A. and Levine, R. (2010). Financial institutions and markets across countries and over time: the updated financial development and structure database. World Bank Economic Review, 24(1), pp. 7792.
Bhagwati, J. (1998). The capital myth. the difference between trade in widgets and dollars. Foreign Affairs, 7(3), pp. 712.
Bjørnskov, C. (2008). Social trust and fractionalization: a possible reinterpretation. European Sociological Review, 24(3), pp. 271–83.
Buckle, B. (2009). Asia-Pacific growth: before and after the global financial crisis. Policy Quarterly, 5(4), pp. 3645.
Chinn, M. D. and Ito, H. (2002). Capital account liberalization, institutions and financial development: cross country evidence. NBER Working Paper no. 8967.
Coccorese, P. (2012). Information sharing, market competition and antitrust intervention: a lesson from the Italian insurance sector. Applied Economics, 44(3), pp. 351–9.
Coccorese, P. and Pellecchia, A. (2010). Testing the ‘quiet life’ hypothesis in the Italian banking industry. Economic Notes by Banca dei Paschi di Siena SpA, 39(3), pp. 173202.
Covert, B. (2015). The 1 percent have gotten all the income gains from the recovery. Think Progress. http://thinkprogress.org/economy/2015/01/28/3616308/income-inequality-2013/ (accessed 04/02/2015).
Djankov, S., Mcliesh, C. and Shleifer, A. (2007). Private credit in 129 countries. Journal of Financial Economics, 84(2), pp. 299329.
Dornbusch, R. (1996). It's time for a financial transactions tax. International Economy, August/September.
DORNBUSCH, R. (1998). Capital controls: an idea whose time is past. In Fischer, S. et al. , Should the IMF Pursue Capital-Account Convertibility? Essays in International Finance no. 207. Princeton, NJ: International Finance Section, Princeton University.
Efobi, E. R., Osabuohien, E. S. and Stephen, O. (2015). One dollar, one bank account: remittance and bank breadth in Nigeria. Journal of International Migration and Integration, 16(3), pp. 761–81.
Eichengreen, B. and Bordo, M. D. (2002). Crises now and then: what lessons from the last era of financial globalization? NBER Working Paper no. 8716.
Fischer, S. (1998). Capital account liberalization and the role of the IMF. In Fischer, S. et al. , Should the IMF Pursue Capital-Account Convertibility? Essays in International Finance no. 207. Princeton, NJ: International Finance Section, Princeton University.
Fish, S. M. (2002). The new era in world politics after September 11: Islam and authoritarianism. World Politics, 55(1), pp. 437.
Freeman, R. B. (2010). It's financialization. International Labour Review, 149(2), pp. 163–83.
Gallup, J. L., Sachs, J. D. and Mellinger, A. (1999). Geography and economic development. Center for International Development (Harvard University), Working Papers no. 1.
Girma, S. and Shortland, A. (2008). The political economy of financial development. Oxford Economic Papers, 60(4), pp. 567–96.
Grennes, T. (2003). Creative destruction and globalization. Cato Journal, 22(3), pp. 543–58.
Guiso, L., Sapienza, P. and Zingales, L. (2004). The role of social capital in financial development. American Economic Review, 94(3), pp. 526–56.
HENRY, P. B. (2007). Capital account liberalization: theory, evidence and speculation. Journal of Economic Literature, 45, pp. 887935.
Huber, P. J. (1973). Robust regression: asymptotics, conjectures and Monte Carlo. The Annals of Statistics, 1(5), pp. 799821.
Kaufmann, D., Kraay, A. and Mastruzzi, M. (2010). The worldwide governance indicators: methodology and analytical issues. Policy Research Working Paper Series 5430, The World Bank, Washington, DC.
Kayizzi-Mugerwa, S. (2001). Globalisation, growth and income inequality: the African experience. Working Paper no. 186, OECD Development Centre, Paris.
Kodila-Tedika, O. and Asongu, S. A. (2015a). Tribalism and financial development. African Governance and Development Institute Working Paper no. 15/018, Yaoundé.
Kodila-Tedika, O. and Asongu, S. A. (2015b). The effect of intelligence on financial development: a cross-country comparison. Intelligence, 51(July–August), pp. 19.
Kose, M. A., Prasad, E. S., Rogoff, K. and Wei, S. J. (2006). Financial globalization: a reappraisal. IMF Staff Papers, 56(1), pp. 862.
Kose, M. A., Prasad, E. S. and Taylor, A. D. (2011). Threshold in the process of international financial integration. Journal of International Money and Finance, 30(1), pp. 147–79.
Lane, P. R. and Milesi-Ferretti, G. M. (2007). The external wealth of nations market: revised and extended estimates of foreign assets and liabilities, 1970–2004. Journal of International Economics, 73(2), pp. 223–50.
La Porta, R., Florencio, L.-D.-S., Shleifer, A. and Vishny, R.W. (1997). Legal determinants of external finance. Journal of Finance, 52(3), pp. 1131–50.
La Porta, R., Florencio, L.-D.-S., Shleifer, A. and Vishny, R.W. (1998). Law and finance. Journal of Political Economy, 106(6), pp. 1113–55.
La Porta, R., Lopez-De-Silanes, F. and Shleifer, A. (2008). The economic consequences of legal origins. Journal of Economic Literature, 46(2), pp. 285332.
La Porta, R., Lopez-De-Silanes, F., Shleifer, A. and Vishny, R. (1999). The quality of government. Journal of Law, Economics and Organization, 15(1), pp. 222–79.
Leung, H. M. (2003). External debt and worsening business cycles in less developed countries. Journal of Economic Studies, 30(2), pp. 155–68.
Midi, H. and Talib, B. A. (2008). The performance of robust estimator on linear regression model having both continuous and categorical variables with heteroscedastic errors. Malaysian Journal of Mathematical Sciences , 2(1), 2548.
MILANOVIC, B. (2011). More or less? Finance & Development, 48(3). www.imf.org/external/pubs/ft/fandd/2011/09/Milanovic.htm (accessed 4 February 2015).
Motelle, S. and Biekpe, N. (2015). Financial integration and stability in the Southern African development community. Journal of Economics and Business, 79(May–June), pp. 100–17.
Mulwa, M. R., Emrouznejad, A. and Murithi, F. M. (2009). Impact of liberalization on efficiency and productivity of sugar industry in Kenya. Journal of Economic Studies, 36(3), pp. 250–64.
Musila, J. W. and Sigué, S. P. (2010). Corruption and international trade: an empirical investigation of African countries. World Economy, 33(1), pp. 129–46.
Nabi, M. S. (2013). Role of Islamic finance in promoting inclusive economic development. Paper presented at the Global Sustainable Finance Conference 2013, Germany, 4–5 July 2013. www.wfdfi.net/wp-content/uploads/2013/09/6-Mahmud_Nabi.pdf (accessed 4 February 2015).
Nyasha, S. and Odhiambo, N. M. (2015a). Do banks and stock market spur economic growth? Kenya's experience. International Journal of Sustainable Economy, 7(1), pp. 5465.
Nyasha, S. and Odhiambo, N. M. (2015b). The impact of banks and stock market development on economic growth in South Africa: an ARDL-bounds testing approach. Contemporary Economics, 9(1), pp. 93108.
Nunn, N. and Puga, G. (2012). Ruggedness: the blessing of bad geography in Africa. Review of Economics and Statistics, 94(4), pp. 2036.
Obeng-Odoom, F. (2013). Africa's failed economic development trajectory: a critique. African Review of Economics and Finance, 4(2), pp. 151–75.
Obeng-Odoom, F. (2015). Africa: on the rise, but to where? Forum for Social Economics, 44(3), pp. 234–50.
Obstfeld, M. (1998). The global capital market: benefactor or menace? Journal of Economic Perspectives, 12(4), pp. 930.
Osabuohien, E. S. and Efobi, E. R. (2013). Africa's money in Africa. South African Journal of Economics, 81(2), pp. 292306.
Oxfam (2015). Richest 1% will own more than all the rest by 2016. Oxfam International. www.oxfam.org/en/pressroom/pressreleases/2015-01-19/richest-1-will-own-more-all-rest-2016 (accessed 4 February 2015).
Oxfam (2017). Just 8 men own same wealth as half the world. Oxfam International. www.oxfam.org/en/pressroom/pressreleases/2017-01-16/just-8-men-own-same-wealth-half-world (accessed 25 February 2017).
Özak, O. (2016). Distance to the pre-industrial technlogical frontier and economic development. MPRA Paper no. 74737, Munich.
Petras, J. and Veltmeyer, H. (2001). Globalization Unmasked: Imperialism in the 21st Century. London: Zed Books.
Prasad, E. S. and WeI., S. J. (2007). China's approach to capital inflows: patterns and possible explanations. In Edwards, S. (ed.), Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences. Chicago: University of Chicago Press.
Price, G. N. and Elu, J. U. (2014). Does regional currency integration ameliorate macroeconomic shocks in sub-Saharan Africa? The case of the 2008–2009 global financial crisis. Journal of Economic Studies, 41(5), pp. 737–50.
Rajan, R. G. and Zingales, L. (1998). Financial dependence and growth. American Economic Review, 88(3), pp. 559–86.
Rodrik, D. (1998). Who needs capital-account convertibility? In Fischer, S. et al. , Should the IMF Pursue Capital-Account Convertibility? Essays in International Finance no. 207. Princeton, NJ: International Finance Section, Princeton University.
Rodrik, D. and Subramanian, A. (2009). Why did financial globalization disappoint? IMF Staff Papers, 56(1), pp. 112–38.
Rogoff, K. S. (1999). International institutions for reducing global financial instability. Journal of Economic Perspectives, 13(4), pp. 2142.
Scholte, J. A. (2000). Globalisation: A Critical Introduction. New York: St Martin's Press.
Seif, R. (2014). Statistical Analysis of Matching Processes of Composite Materials. University of Montreal. http://publications.polymtl.ca/1606/1/2014_RandaSeif.pdf (accessed 24 April 2015).
Shah, A. and Patnaik, I. (2009). Asia confronts the impossible trinity. Mimeo, NIPFPDEA.
Sirgy, M. J., Lee, D. J., Miller, C. and Littlefield, J. E. (2004). The impact of globalization on a country's quality of life: toward an integrated model. Social Indictors Research, 68(3), pp. 251–98.
Smart, B. (2003). Economy, Culture and Society: A Sociological Critique of Neo-liberalism. Buckingham: Open University Press.
Stiglitz, J. E. and Weiss, A. (1981). Credit rationing in markets with imperfect information. American Economic Review, 71(3), pp. 393410.
Solow, R. M. (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70(1), pp. 6594.
Stiglitz, J. (2000). Capital market liberalization, economic growth and instability. World Development, 28(6), pp. 1075–86.
Stulz, R. M. and Williamson, R. (2003). Culture, openness, and finance. Journal of Financial Economics, 70(3), pp. 313–49.
Summers, L. H. (2000). International financial crises: causes, prevention and cures. American Economic Review, 90(2), pp. 116.
Tchamyou, V. S. (2016). The role of knowledge economy in African business. Journal of the Knowledge Economy. DOI: 10.1007/s13132-016-0417-1.
Tchamyou, V. S. and Asongu, S. A. (2017). Information sharing and financial sector development in Africa. Journal of African Business, 18(1) pp. 2449.
Tsai, M. (2006). Does globalisation affect human well-being? Unpublished paper, Department of Sociology, National Taipei University, Taiwan.
Weber, M. (1930). The Protestant Ethic and The Spirit of Capitalism, trans. Baehr, P. and Wells, G. C.. London: Penguin.
World Hunger (2010). The major barrier to people's welfare and development. Hunger Notes. http://worldhunger.org/harmfuleconomicsystems.htm (accessed 4 February 2015).
Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

Financial History Review
  • ISSN: 0968-5650
  • EISSN: 1474-0052
  • URL: /core/journals/financial-history-review
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Keywords

JEL classification

Metrics

Altmetric attention score

Full text views

Total number of HTML views: 7
Total number of PDF views: 116 *
Loading metrics...

Abstract views

Total abstract views: 463 *
Loading metrics...

* Views captured on Cambridge Core between 18th December 2017 - 16th August 2018. This data will be updated every 24 hours.