Public-Private Partnership and Financial Structure Development: Cointegration Lessons for selected sub-Sahara African Economies

摘要

The financial system of sub-Sahara Africa provides weak support for its long-term real sector development. The bank-based finance option in these economies promotes non-competitive market mechanism, which result in high interest rate spread. The study applies an augmented Toda-Yamamoto causality technique to test the dynamic relationship between private participation in infrastructure, interest-rate spread, and institutions' regulatory quality in four sub-Saharan African economies of Kenya, Mauritius, South Africa, and Nigeria. The results provide evidence that private participation in infrastructure can induce interest-rate spread downward. The study recommends public-private partnership investments to deliver projects at lower marginal cost.