What Drives Financial Sector Development in Africa? Insights from Machine Learning

This study uses machine learning techniques to identify the key drivers of financial development in Africa. To this end, four regularization – Standard lasso, Adaptive minimum Schwarz Bayesian information criterion and Elasticnet– are trained based on a dataset containing 86 covariates for period 1990 - 2019. The results show that variables such as cell phones, economic globalization, institutional effectiveness, literacy crucial sector Evidence from Partialing-out lasso instrumental variable regression reveals while inflation agricultural employment suppress development, phones effectiveness remarkable spurring Policy recommendations provided line with rise technological progress