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sighted speculation-led economic development characterized by risky investment practice and causing resources to be diverted away from productive use. Emphasis is on uncertainty with endogeneous expectations and endogenous instability that need to be interrupted by some institutional intervention. The idea of market makers is proposed to provide an anchor for market psychology and hence prevent any bandwagon tide leading to disruptive speculation. Chapter 5 is a descriptive chapter presenting the banking sector, the insurance sector, the security market and the offshore sector in Mauritius. The changes at regulation and supervision level with a view to improve the protection of both financial investors and consumers of financial services are examined. Chapter 6 discusses domestic banking issues in Mauritius. It reviews the shift from direct to indirect control of money supply considering both internal and external reforms, banking spread and banking crises. Chapter 7 measures financial development in terms of stock market indicators. Some cross country comparisons are made. It also contains a pre and post liberalisation examination of the volatility of share prices, return, and non- diversifiable risk. -14-
Chapter 8 presents an econometric analysis of financial deepening, the causality between finance and growth, corporate financial strategy before and after financial liberalisation and also the analysis regarding interest rate spread. Chapter 9 presents a discussion, conclusions, policy implications and future directions for research. - 15 -
Page 1 and 2: Financial Liberalisation in Mauriti
Page 3 and 4: elated to real interest rate. This
Page 5 and 6: DECLARATION I, Jean Karl JOUAN, her
Page 7 and 8: Chapter 3 Institutional Aspects, Em
Page 9 and 10: 6.7 Summary 220 Chapter 7 Stock Mar
Page 11 and 12: LIST OF TABLES Tables Page Chapter
Page 13 and 14: Chapter 7 1.7 Stock Market Developm
Page 15 and 16: Change 2.8 Tests of Equality of var
Page 17 and 18: LIST OF CHARTS Figures Page Chapter
Page 19 and 20: 10.7 200 Trading Sessions before an
Page 21 and 22: GLOSSARY OF ABBREVIATIONS ACF Autoc
Page 23 and 24: NBF1 Non Bank Financial Institution
Page 25 and 26: Chapter I 1.1 The Country INTRODUCT
Page 27 and 28: from amongst the newly independent
Page 29 and 30: cyclone in 1980 and (ii) the world
Page 31 and 32: Because the unemployment level star
Page 33 and 34: 5. What are the changes in financia
Page 35 and 36: had to be limited to a sample of on
Page 37: assets (money) to productive illiqu
Page 41 and 42: deficit parties. Direct financing t
Page 43 and 44: market. The crux of his argument is
Page 45 and 46: eroded with deflation. They therefo
Page 47 and 48: However, today notes and coins in c
Page 49 and 50: High interest rates were charged be
Page 51 and 52: pushed towards government intervent
Page 53 and 54: ecome more appropriate to adopt fin
Page 55 and 56: " nen a strong impulse to invest is
Page 57 and 58: pre-condition. Intermediaries set u
Page 59 and 60: Figure 1.2 Saving and Investment un
Page 61 and 62: The higher the real deposit rate of
Page 63 and 64: According to the Shaw analysis, whe
Page 65 and 66: spread, Brock and Suarez (2000) obs
Page 67 and 68: productivity of the investment proj
Page 69 and 70: market50 where "depositors" could g
Page 71 and 72: 2.5 Extensions of the McKinnon and
Page 73 and 74: financed) Ratio of loans to money s
Page 75 and 76: The policy implication is then to r
Page 77 and 78: also by deposits from the tradition
Page 79 and 80: investment. Since a proportion of t
Page 81 and 82: output in response to higher intern
Page 83 and 84: It must be observed that while Chin
Page 85 and 86: to deposit 30% of the loan at the c
Page 87 and 88: Chapter 3 3.1 Introduction INSTITUT
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firms (shares and bonds) into liqui
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3.3 Stock Market Development th The
Page 93 and 94:
Cho (1986) argues that a well-funct
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Kumar and Tsetsekos (1998) highligh
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[Singh, 1997, pp. 771-782] Using da
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The question of direction of causal
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The McKinnon and Shaw models and th
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process was initiated in an environ
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An interesting point to note is tha
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so as to weaken the market power of
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(1) Managing the reform rather than
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Equally inherited in many African c
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commitment of funds to risk concent
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Further by classifying assets in fo
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In recent years, with structural de
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improved information and communicat
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of the agency and reduces moral haz
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The unfolding of economic events af
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countries with banking crises since
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of loanable funds. However, this ef
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Buffle points out that increased sa
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micro foundation of Keynesian macro
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loanable funds were in fact allocat
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equilibrium is a credit rationing e
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Development Bank in the early 1980s
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ecause depositors consider that suc
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the recent financial crises in emer
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institutions and those that are not
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In spite of virulent attacks from s
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asymmetry of information does not s
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can guarantee that a depression or
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(a) Refinancing on less favourable
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acquisition of financial assets. Su
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New-Classicals as unwarranted obstr
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After the oil shocks in the 1970's
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to the Latin American economies hel
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(Minsky 1982). Their problems would
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psychology and prevents any bandwag
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would require an implausible surren
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Chapter 5 5.1. An Overview THE MAUR
Page 169 and 170:
Figure 1.5 Financial Sector in Maur
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The above table gives an indication
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Table 3.5 Market Share of MCB & SBM
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depositors who believe in the "too
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The banking concentration issue in
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more than doubled, from 27% pre-lib
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Table 8.5 Share of Assets among Ins
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Table 10.5 Share of Gross long-term
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deposit of Rs8rn with the Financial
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on all weekdays 185 . Tier 2 is the
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member of the International Organis
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(3) Facilitating the ongoing privat
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Using standard deviation as a forma
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5.5 The Offshore Sector (Global Bus
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Financial Intelligence Uniell of su
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the total investment representing U
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managed by Insurance Companies), Co
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I" Stage: The Financial Services Co
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Chapter 6 6.1. Introduction LIBERAL
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The process of financial liberalisa
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with the economic growth strategy o
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As banks competed for offering loan
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The start of open market operations
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date and price. The broad monetary
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Table 5.6 Changes in Real Interest
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3. The real interest rate on saving
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egular issues while promoting long-
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permits/licenses added competitive
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some corporate bodies to borrow dir
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Figure 5.6 6- 4- 2- 0- /// -21 64 B
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allowed to trade foreign currencies
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Capital Base To tighten prudential
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Table 8.6 Changes in Capital Ratio
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Table 11.6 As at June Non-Performin
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Table 13.6 Figure 6.6 Comnonentq nf
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from six monthly audited accounts b
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6.6.2 Reforms and Banking Crisis In
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Table 14.6 Bank Deposit Crisis and
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are adequately capitalized and have
Page 247 and 248:
Table 1.7 Stock Market Development
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Table 2.7 Gross National Savings Ra
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Table 3.7 Comparison with Sub-Sahar
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elow the level reached in developed
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7.2 Stock Market Liberalisation 7.2
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Figure 2.7 Accumulated Foreign Port
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Table 7.7 Stability Test with Break
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7.2.3 Random Walk of Stock Prices I
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Kawakatsu and Morey (1999) and Magh
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Figure 6.7 Figure 7.7 Correlog ram:
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A visual display of the plot of the
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The probability value of the test s
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Table 14.7 Breusch-Godfrey Serial C
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Table 20.7 AutoRegression Output af
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mean and higher variability of retu
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components: The model considers tot
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working out each asset return at th
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PAD HWF NMHL CAUDAN 1990 N. A N. A
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enough evidence to reject the null
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Figure 13.7 50 40 30 20 10 -10 -20
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100 80 60 40 20 0 -20 -40 -60 -10 F
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The F statistic falls well within t
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Figure 16.7 Comparative Growth in T
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Figure 17.7 Stock Price Index Relat
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een more volatile after liberalisat
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1. A shift towards a portfolio comp
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stability is therefore run with 199
Page 301 and 302:
Table 3.8 Tests of Equality of Mean
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this is confirmed by the regression
Page 305 and 306:
Table 5.8 Ramsey RESET Test: Specif
Page 307 and 308:
Table 7.8 Redundant Variable Test R
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There is a first indication of no s
Page 311 and 312:
Table 10.8 White Heteroskedasticity
Page 313 and 314:
Table 11.8 Money Equation: Pooled S
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summary. SWA-REER SWA 0.019271 0.01
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I Table 13.8 Significant Coefficien
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IA Currency + Demand DEPTH and inte
Page 321 and 322:
Table 14.8 Growth Regression Result
Page 323 and 324:
A different approach is now adopted
Page 325 and 326:
Log(INV), --ý C3+a3., Log(RGDP), +
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Before running the test of no-causa
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PP Test Statistic -1.199070 1% Crit
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D(LOG(PRIVY)) does not Granger Caus
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Table 19.8 Date: 09/22/04 Time: 10:
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Table 20.8 Date: 09/22/04 Time: 10:
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0.1321213189*D(LOG(EXPO(-2») + 0.2
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LOG(RGDP(-l)) LOG(RGDP(-l)) does no
Page 341 and 342:
_D(LOG(INV)) D(LOG(PRIVY)) does not
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Cause D(LOG(RGDP(-l))) D(LOG(RGDP(-
Page 345 and 346:
D(LOG(PRIVY)) D(LOG(INV(-l))) does
Page 347 and 348:
D(LOG(EXPO)) D(LOG(EXPO)) D(LOG(INV
Page 349 and 350:
model shows a positive relationship
Page 351 and 352:
Table 22.8 Equality Tests Test for
Page 353 and 354:
li, t = CLO +CLI 13t 7 ýZU-2 ii. t
Page 355 and 356:
Table 24.8 Regression Results befor
Page 357 and 358:
8.5 Liberalisation and Banking Spre
Page 359 and 360:
Log(SPRF, 4D), = C, +a,., Log(SPREA
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0.01557554697*MKTSHARE(-2) + 0.5556
Page 363 and 364:
0.208648 6.076617 15.41 20.04 At mo
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to credit after liberalisation and
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measurement of the mini banking cri
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aiming at dampening any band-wagon
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with such changes banks behaviour c
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promote the development of banks an
Page 375 and 376:
, REFERIENCES 1. Ackert, L. F., Chu
Page 377 and 378:
18. BasantRoi, R. (2001)AddressbyR.
Page 379 and 380:
34. Brash, D. T. (1997): "Dr. Brash
Page 381 and 382:
49. Collier, P., and Mayer, C. (198
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64. Demetriades, P., and Liuntel, K
Page 385 and 386:
82. Felix, D (200 1) "y Internation
Page 387 and 388:
100. Goldsmith, R. W. (1969) Financ
Page 389 and 390:
120'. IMF (1999) (a) A Report on th
Page 391 and 392:
140. Keynes, J. M. The Collected Wr
Page 393 and 394:
160. Levhari, D and Patinkin, D (19
Page 395 and 396:
179. Mc Kinnon, R. (1973) Money and
Page 397 and 398:
196. Patel, S and Sarkar A (1998) "
Page 399 and 400:
211. Sharpe, W. (1964) " Capital As
Page 401 and 402:
23 1. Subrahmanyam, A. (1994) "Circ
Page 403 and 404:
250. Veblen, T. (1899), 'Indusrial
Page 405 and 406:
APPENDICES xxxii
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Tablel. 2 Appendix 2 Summary of Mac
Page 409 and 410:
5 Interest rate Real deposit rate d
Page 411 and 412:
Development developed financial int
Page 413 and 414:
peg was also present in the Latin A
Page 415 and 416:
Appendix 5 Short History of Banking
Page 417 and 418:
as a marketing instrument in the pr
Page 419 and 420:
Appendix 7 Chronology of Liberalisa
Page 421 and 422:
components: - Appendix 9 Basel Prov
Page 423:
to ensure that 20% of their substan
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