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

Table 2: GMM model regression (The 8 WAEMU countries) FINANCE Coef. Std.Err. t P > |t| FINANCE( t-1) 0.004 0.004 1.04 0.331 RGDPC -0.481 0.276 -1.75 0.124 INFLATION -1.753 1.103 -1.59 0.156 INTECO -0.732 0.198 -3.70 0.008*** INSTPOL -0.484 0.053 -9.12 0.000*** INSTFIN 2.094 0.032 65.01 0.000*** CONSTANT 4.572 2.428 1.88 0.102 Hansen test for overid. restrictions chi2 (97) = 0.03 prob>chi2 = 1.000 Arellano-Bond test for AR (1) z = -0.78 pr> z = 0.438 Arellano-Bond test for AR (2) z = -0.35 pr> z = 0.727 Prob> F = 0.000 *** F(5, 7) = 1,14e+06 Source: Author Notes: INTECO= Economic Institutions; INSTPOL =Political Institutions; INSTFIN= Financial Institutions; RGDPC = Gross Domestic Product per capita. The Arenallo and Bond dynamic panel system GMM estimations (Stata xtabond2 command) is used to estimate this model. P-value *** indicates 1% of the significance level. The Hansen test is accepted the over-identification restrictions. The null hypothesis of the absence of first-order serial correlation (AR1) andsecond-order serial correlation (AR2) are also accepted. These results show us that our new composite indicator of financial development had a positive and significant impact on development. Economic institutions and political institutions have taken in isolation have negative and significant coefficients, which we explain by the fact that in our opinion, the quality of the institutions will only have a real and significant impact on the financial sphere when there is an interpenetration of institutional performance with financial variables. • Regarding the delayed variable of finance and the price, the level has insignificant coefficients. This can be explained by the fact that the problems of endogeneity that were suspected are not proven, and we could, therefore, have estimated our equation with a static panel model (what we do later in this work). • The gross domestic product (GDP) per capita and inflation have negative and insignificant coefficients, so we will avoid giving them an interpretation. Our composite indicator of financial development has a positive coefficient (+ 2.09) and significant. As a result, our assumption, according to which the financial development indicator we have built, is sufficiently relevant to explain that the evolution and development process of the financial system tends to be reinforced by the positive and significant sign in its coefficient in econometric estimates. The WAEMU countries are among the countries that are experiencing difficulties in their economic development. On the one hand, these difficulties are remarkable because of the inefficiency that characterizes their financial system. We believe from the results we have obtained during our research (theoretical and empirical) that institutional quality plays a very significant role in the functioning and capacity of the financial sphere to enable the emergence of a financial system efficient in an economy. We also believe that the positive impact of our composite indicator of development (unlike the coefficients of economic and political institutions indicators taken in isolation) shows its consistency in its ability to measure financial development. We found it interesting to replicate the same method to see if the results that support the relevance of our composite indicator of financial development to countries with characteristics quite different from those of the WAEMU countries, namely 25 OECD countries. © 2020 Global Journals 31 Global Journal of Management and Business Research Volume XX Issue I Version I Year 2020 ( ) B Institutional Quality and Financial Development in West Africa Economic and Monetary Union