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ABSTRACT
The purpose of the thesis is to explore the empirical relevance of the theory of
financial liberalisation in the Mauritian context. After confronting the conflicting views
in the literature, the changes that have taken place in the financial sector in terms of
monetary policy and the institutional developments are examined. The study shows that
government has played a role in boosting financial intermediation before liberalisation
and that it has still a role to play after liberalisation. It also explains the measures taken
to improve financial stability. The high concentration in both the banking and insurance
sectors are also discussed.
The thesis finds no evidence of an increase in real interest rate after
liberalisation or any consequential improvement in domestic savings as suggested by
the liberalisation theories. Further external liberalisation has not led to a drop in real
interest rate and increased savings. Some minor episodes of banking and stock market
crises have been identified. The research also examines the links between interest
spread after liberalisation, fund cost and market share and the results tend to support the
proposition that there is unidirectional causality from market share to interest spread.
No significant change in share market size, liquidity and activity has been
observed after liberalisation and the collective investment schemes have not yet
indicated signs of ability to considerably mobilize savings and hence to boost the
security market.
There is evidence of a slow down of the financial deepening process as the
liquidity ratio M2 exceeds 65%. Financial deepening is not found to be positively
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