Global Journal of Management and Business Research, B: Economics and Commerce, Volume 20 Issue 1

Institutional Quality and Financial Development in West Africa Economic and Monetary Union SOW Djeri α , Liangsheng Du (Prof) σ , M’baye Mamadou (Phd) ρ , Nyande Fania Ѡ & Gnangoinyobouet Thierry Bienvenu ¥ Abstract- Having become aware of the financial status of underdeveloped c ountries of the West African Economic and Monetary Union (WAEMU) and the potential role of institutional factors in the effectiveness of financial development policies, this s tudy proposes an analysis of the impact of institutional quality on the success of their financial development policy. The r esults of the study show tha t institutions have a decisive impact on the finance effect on economic growth and development. The study explains that s ince independence (1960) to the present, various financial development policies have not paid off. The author, therefore, assig ns a cause for these, institutional deficiencies, and inconsistencies in the choice of economical and financial policies and shortcomings in the quality of governance. This study emphasizes the role of institutions and a favorable legal and institutional environment for the formation of a foundation for healthy financial development. We are building a new composite indicator of financial development, incorporating institutional variables. We have shown through econometric estimates both on developed countries and those of the West African Economic and Monetary Union in the period 1996-2016, as the institutional quality has a positive impact on financial development. Keywords: institutional quality, financial policy development, static and dynamic panel, a composite indicator of financial development. I. I ntroduction eveloping countries, particularly those from the West African Economic and Monetary Union (WAEMU), are characterized by economic, political, and social structures that do not meet the basic needs of the population. Massive poverty and low integration also characterize these countries into the global economy. The rates of economic growth in that area of Africa are relatively low and are also characterized by excess volatility. This economic and monetary zone has a rather significant financial delay over the developing countries in general and the other countries in sub-Saharan Africa in particular although it is seen as one of the most dynamic and promising areas of the continent. Indeed, the financial sector of the WAEMU countries, notwithstanding the development it has experienced in recent years, remains characterized by a low depth, extent, and access, which impedes sustainable economic development and is harmful to the effectiveness of macroeconomic policies. These shortcomings at the level of their financial system can be explained by shortcomings in their institutions and governance mechanisms (political, economic, social, etc.). These shortcomings jeopardize a real development process, which would be characterized by their transition from a stage of economy based on the exploitation of primary products to that of industrial transformation. In our view, an analysis of the problems experienced by these developing countries, consisting of an evaluation of financial development policies in terms of institutional factors, would be a fruitful approach to estimating the potential of Development in these countries. However, as part of our research, we found it useful to focus on the internal dynamics of development, namely the links between the institutional and the financial aspects. This study aims to answer the question on to what extent does the State or sub-regional institutional framework influences the performance of the financial system; and conditions the results of financial development policies? Indeed, the institutional issue in an empirical approach to financial development is the subject of more and more research work in economics. Increasingly, the idea that the performance of the financial system cannot be the result of the only factor of financial liberalism is present in the literature. But these performances would be due to the interaction of a more complex set of data that does not just fall within the evolution of financial regulations. In particular, institutional policies and arrangements would play a role in the relationship between finance and growth; the quality of the institutions may even be perceived as the primary determinant of financial and economic development (Acemoglu et al., 2004; Rodrik and Subramanian, 2003).The institutional issue thus has an undeniable relevance in so far as the paradigm of development prevailing until the beginning of the 90s D Author α : Dongbei University of Finance and Economic (DUFE) School of Economics. e-mail: djerisow88@yahoo.fr Author σ : Economic School, Dongbei University of Finance and Economic (DUFE) School of Economics. e-mail: duliangsheng@vip.sina.com Author ρ : Professor of Economics at Mali's Higher Institute of Computer Science and Management School of Economics. e-mail: mbayemamadou18@yahoo.fr Author Ѡ : Dongbei University of Finance and Economic (DUFE) School of Accounting. e-mail: sianyande@outlook.com Author ¥ : Dongbei University of Finance and Economic (DUFE) School of Economics. e-mail: thierrybienvenu2010@yahoo.fr © 2020 Global Journals 23 Global Journal of Management and Business Research Volume XX Issue I Version I Year 2020 ( ) B