Anti-money laundering measures and financial sector development: Empirical evidence from Africa

Figures & data

Table 1. Measurement and descriptions of variables in the model above

Variables	Description	Measurement	Expected sign
DCPS	Domestic credit to private sector	domestic credit to the private sector (DCPS) as a percentage of GDP%
AML	Anti-money laundering regulation	Basel AML Index	+
CPI	Inflation	Consumer price index	-
UMP	Unemployment	Unemployment percentage of the total labour force	-
BSZ	Bank size	Private credit by deposit money banks to GDP	+
BRW	Borrowing from banks	Rate of borrowing	-

Note: Source: Authors’ Construct (2022).

Table 2. Descriptive statistics

Variables	Obs	Mean	Std. Dev.	Min	Max	Variance	Skew.	Kurt.
DCPS	459	25.601	24.231	1.123	128.85	6.039	2.341	8.269
AML	459	3.992	.975	1.673	7.81	.949	.331	4.73
InCPI	459	4.957	.387	4.627	8.43	.150	4.028	27.083
UMP	459	8.432	6.542	.384	28.181	42.802	1.082	3.35
BSZ	459	68.642	12.966	32.521	100	168.104	.271	4.349
BRW	459	145.81	91.352	.566	336.55	1.494	−.372	5.336

Where DCPS is Domestic Credit to Private Sector (%GDP), AML is Anti-Money Laundering regulations, CPI is Consumer Price Index (Inflation), UMP is unemployment, BSZ is bank size, and BRW is Borrowing.

Table 3. Pairwise correlation matrix

Variables	(1)	(2)	(3)	(4)	(5)
(1) AML	1.000
(2) CPI	0.069	1.000
	(0.138)
(3) UMP	0.146*	0.076	1.000
	(0.002)	(0.106)
(4) BSZ	−0.022	−0.037	0.139*	1.000
	(0.638)	(0.435)	(0.003)
(5) BRW	0.129*	−0.091	0.163*	0.050	1.000
	(0.006)	(0.051)	(0.000)	(0.282)

*** p < 0.01, ** p < 0.05, * p < 0.1.

Table 4. Effect of anti-money laundering regulations on financial sector development

	(1)
	DCPSG
L.DCPSG	1.381***
	(.053)
AML	.359
	(.346)
CPI	−.029**
	(.011)
UMP	−.433*
	(.225)
BSZ	.239**
	(.091)
BRW	−.005
	(.008)
Observations	357
AR(1)	0.031
AR(2)	0.982
Sargan	0.000
Hansen Number of groups Number of instruments	0.244 51 19
Pseudo R^2	.z

Standard errors are in parentheses.

*** p < .01, ** p < .05, * p < .1.

Table 5. Dynamic panel threshold test of AML and FSD

	AML
Linearity Test (Prob)	0.000
No. of bootstrap replications	2000
Trimming percentage	0.15
Grid number	100

Table 6. Dynamic panel threshold regression results of AML regulations and FSD

	(1) Low-regime (<4.228)	(2) High-regime (>4.228)	(3) Overall
Lag of DCPS	.529***	.127***	.608***
	(.014)	(.016)	(.008)
CPI	−.3.365***	−.246	−2.579***
	(.835)	(1.217)	(.406)
UMP	.1.344***	.161***	1.174***
	(.183)	-(.044)	(.104)
BSZ	−0.089***	.078***	.034***
	(.017)	(.026)	(.003)
BRW	.019***	−.023***	−.007***
	(.0002)	(.004)	(.001)
AML	2.863**	−1.477***	−3.296***
	(.616)	(.678)	(.626)
Cons	1.672
	(6.407)
Kink_slope			5.557*** (.626)
Threshold value Country Effect Time Effect	Yes Yes	(4.228)	3.872 Yes Yes

Standard errors are in parentheses *** p < .01, ** p < .05, * p < .1.