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

Table 7: The fixed - effect model FINANCE Coef. Std.Err. t P > |t| RGDPC -0.353 0.135 -2.62 0.009*** INFLATION 2.056 0.001 3751.16 0.000*** INTECO -0.228 0.059 -3.87 0.000*** INSTPOL -0.697 0.060 -11.58 0.000*** INSTFIN -0.0367 0.048 -0.76 0.449 CONSTANT 1.627 0.529 3.07 0.002*** sigma_u 0.232 0.100 0.843 sigma_e rho Prob> F = 0.000*** F test that all u_i F(24, 420) = 87.75 Source: Author Notes: INTECO= Economic Institutions; INSTPOL =Political Institutions; INSTFIN= Financial Institutions; RGDPC = Gross Domestic Product per capita. P value *** indicates 1%, of significance level. Table 8: The random effects model FINANCE Coef. Std.Err. z P > |z| RGDPC -0.326 0.119 -2.73 0.006*** INLATION 2.056 0.001 3808.95 0.000*** INTECO -0.217 0.0568 -3.81 0.000*** INSTPOL -0.691 0.0581 -11.89 0.000*** INSTFIN 0.0296 0.046 0.64 0.520 CONSTANT 3.276 0.461 3.26 0.001*** sigma_u 0.051 0.098 0.213 sigma_e rho Prob> chi2 = 0.000 wald chi2 (5) = 2.56e+07 Source: Author Notes: INTECO= Economic Institutions; INSTPOL =Political Institutions;INSTFIN= Financial Institutions; RGDPC = Gross Domestic Product per capita. P value *** indicates 1%, of significance level. Table 9: Test Hausman and Test of Breusch-Pagan Test of Breusch-Pagan Test Hausman Chi2 (1) 2404.82 Chi2 (5) 5.55 Prob> chi2 0.0000 Prob> chi2 0.3521 Source: Author - When working with the Panel of Eight (8) WAEMU countries, the Hausman test tells us that the fixed- effect model should be retained, while with the sample of the OECD countries, the Hausman test does not allow us to decide between the two models (fixed Effects and Random Effects). - In both samples and regardless of the estimated model, the coefficients are almost identical. Namely: A positive and significant effect of the new composite indicator of financial development. And the other institutional variables taken in isolation show negative and significant coefficients on the phenomenon of financial development. V. C onclusion The WAEMU countries are characterized by what is called financial underdevelopment in literature. This work aimed to show that the quality of (political and economic) institutions has an influence on the process © 20 20 Global Journals 34 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 systematic Because the probability of Hausman's test (0.3521) is high than 5%, the random-effect model is preferable to the fixed-effects model. Test of Breusch-Pagan: This test decides between a random effects regression and a simple OLS regression. The probability of Breusch- Pagan test (0.0000) is less than 5%, so the null hypothesis is accepted, and the random effect is appropriate. Our results in this static panel regression game show us that: Test Hausman: H0: difference in coefficient not