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5.3 The Insurance Sector in Brief 156 5.3.1 An Overview 156 5.3.2 Regulation and Supervision of the Insurance Sector 160 5.4 Introducing the Securities Market 162 5.5 The Offshore Sector (Global Business) 171 5.6 Recent Institutional Changes at the Regulatory and Supervisory 176 Level in the Financial Sector 5.7 Summary 180 Chapter 6 Liberalisation and the Banking Sector In Mauritius 181 6.1 Introduction 181 6.2 Internal Reforms 183 6.2.1 Directed Credit and Reserve Requirement 183 6.2.2 Shifting to Indirect Monetary Policy Instruments 188 6.2.3 Shifting to Indirect Monetary Policy Instruments 192 6.2.4 Stimulating Savings 195 6.3 External Reforms 198 6.4 Regulation, Supervision and Performance 206 6.5 Market Discipline in the Banking Sector 214 6.6 Reforms and Interest Spread 215 6.6.1 Changes Observed 215 6.6.2 Reforms and Banking Crisis 217 vii
6.7 Summary 220 Chapter 7 Stock Market Development and Liberalisation Impact 222 in Mauritius 7.1 Stock Market Development in Mauritius 222 7.2 Stock Market Liberalisation 231 7.2.1 Transactions by Foreigners 231 7.2.2 Liberalisation and Stock Prices 234 7.2.3 Random Walk of Stock Prices 237 7.2.4 Stock Market Liberalisation and Returns 250 7.2.5 Stock Market Liberalisation and Non-Diversifiable Risk of Listed Shares 252 7.2.6 Stock Market Liberalisation and Stock Market Development 259 7.3 Stock Market Crisis 267 7.4 Summary 270 Chapter 8 Modelling Some Impact of Financial Liberalisation in Mauritius 2 72 8.1 Introduction 272 8.2 Financial Deepening - Mauritius and the Region 272 8.2.1 Financial Deepening Mauritius 274 8.2.2 Cross-Country Analysis 288 8.3 Financial Deepening and Growth 293 8.4 Liberalisation and Corporate Sector Financing Strategy 325 viii
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: Chapter 3 Institutional Aspects, Em
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 and 38: assets (money) to productive illiqu
Page 39 and 40: Chapter 8 presents an econometric a
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
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Figure 1.2 Saving and Investment un
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The higher the real deposit rate of
Page 63 and 64:
According to the Shaw analysis, whe
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spread, Brock and Suarez (2000) obs
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productivity of the investment proj
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market50 where "depositors" could g
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2.5 Extensions of the McKinnon and
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financed) Ratio of loans to money s
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The policy implication is then to r
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also by deposits from the tradition
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investment. Since a proportion of t
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output in response to higher intern
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It must be observed that while Chin
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to deposit 30% of the loan at the c
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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
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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
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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
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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
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Table 5.8 Ramsey RESET Test: Specif
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Table 7.8 Redundant Variable Test R
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There is a first indication of no s
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Table 10.8 White Heteroskedasticity
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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
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Table 14.8 Growth Regression Result
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A different approach is now adopted
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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
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_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
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D(LOG(EXPO)) D(LOG(EXPO)) D(LOG(INV
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model shows a positive relationship
Page 351 and 352:
Table 22.8 Equality Tests Test for
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li, t = CLO +CLI 13t 7 ýZU-2 ii. t
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Table 24.8 Regression Results befor
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8.5 Liberalisation and Banking Spre
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Log(SPRF, 4D), = C, +a,., Log(SPREA
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0.01557554697*MKTSHARE(-2) + 0.5556
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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
Page 373 and 374:
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
Page 383 and 384:
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
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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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