|
on Banking |
| By: | Amado Morales, Laura G. (Universidad de los Andes) |
| Abstract: | During the Covid-19 pandemic, the Colombian government established the use of Digital Cash Transfers as a way to mitigate the impact of the economic crisis on the most poor and vulnerable of the Colombian population. Using data from Daviplata, one of the channels the government used to deliver the Digital Cash Transfers, I examine the effect that receiving these transfers had on financial deepening. My findings suggest that receiving a cash transfer via Daviplata increased financial deepening, through an increase in savings and an increase in the average number of transactions made by the user. However, this financial deepening did not translate into the access to a broader portfolio of financial products and services. Following an Difference-in-Differences Event Studies approach, I find that receiving a Digital Cash Transfer (DCT) had an effect on increasing savings in $24, 309, a quite large effect compared to average monthly savings for the targeted population. In terms of transactions, receiving a DCT via Daviplata had an effect of 0.1362, which represents an increase of about 20% compared to the number of average transactions made by the users. |
| Keywords: | Financial Inclusion; Financial Deepening; Cash Transfers; Digital Financial Institutions; Savings Behavior. |
| JEL: | G21 H53 I38 O16 |
| Date: | 2024–09–25 |
| URL: | https://d.repec.org/n?u=RePEc:col:000089:021195 |
| By: | Gary Richardson; Marco Del Angel |
| Abstract: | Which firms relied on commercial banks for credit and which firms did not at the onset of the Great Depression would seem to be an important question given the vast literature discussing banking distress in the United States during the 1930s. The question, however, has not been answered. This essay addresses that issue by analyzing data from an Internal Revenue Service publication, Statistics of Income. The hitherto unexplored data reveals that small firms in all industries borrowed heavily from commercial banks and relied on them for credit necessary to fund ongoing operations. The largest firms in most sectors deposited more in banks than they borrowed from them. Sectors whose firms depended most on commercial banks for credit were wholesaling, retailing, services, and the processing of agricultural products. In contrast, nearly half of economic activity in mining and construction, the majority of output in manufacturing, and the preponderance of firms in transportation operated independent of commercial banks |
| JEL: | E01 E44 N1 N12 N22 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32918 |
| By: | Bouvard, Matthieu; Casamatta, Catherine |
| Abstract: | We study agents that provide Cash-In/Cash-Out (CICO) services to mobile money consumers. A moral hazard friction constrains these agents’ ability to hold liquid reserves, which creates an endogenous cost for operators of ensuring reliable CICO services. Interoperability that allows agents to contract with multiple operators tends to decrease the amount of liquidity held by agents when the moral hazard problem is mild through a higher utilization rate but can increase it when the moral hazard problem is severe. In the latter case, the fees paid by operators to agents become strategic complements sustaining multiple equilibria with different levels of liquidity. Fees from operators to agents tend to be inefficiently low from a welfare perspective, both because operators internalize agents’ agency rents as a cost and because they do not internalize that higher fees, by expanding agents’ capacity to hold liquidity, benefit consumers from other operators. In that context, authorizing interoperability can decrease (when moral hazard is mild) or increase (when moral hazard is severe) welfare. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129703 |
| By: | Stefania Albanesi; Domonkos F. Vamossy |
| Abstract: | Credit scores are critical for allocating consumer debt in the United States, yet little evidence is available on their performance. We benchmark a widely used credit score against a machine learning model of consumer default and find significant misclassification of borrowers, especially those with low scores. Our model improves predictive accuracy for young, low-income, and minority groups due to its superior performance with low quality data, resulting in a gain in standing for these populations. Our findings suggest that improving credit scoring performance could lead to more equitable access to credit. |
| JEL: | C45 D14 E27 G21 G24 G5 G51 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32917 |
| By: | Auriol, Emmanuelle; Gonzalez Fanfalone, Alexia |
| Abstract: | This paper studies how Mobile Network Operator (MNO) impacts traditional banks’ coverage decision in a model of vertical and horizontal differentiation with asymmetric transportation costs. The competitive pressure triggered by MNOs entry on traditional banking sector leads to prices decrease and broadens financial inclusion as the traditional banking sector expands its network in response to the entry of MNOs. The model’s predictions are checked against data from Kenya, where mobile banking has been most successful. Results from the econometric model for the period 2000-2011, suggest that, roughly, for each 7 new mobile agents in a sub-locality, one new bank branch opened. |
| Keywords: | Financial inclusion; Regulation; Mobile banking; Development |
| JEL: | G18 L51 L88 L96 O16 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:129721 |
| By: | Camélia Sehaqui (Université Hassan 1er [Settat]); Mohamed Haissoune (Université Hassan 1er [Settat]) |
| Abstract: | This article seeks to analyze the application of artificial intelligence (AI) in counterparty risk management, focusing on Moroccan participatory banks. To this end, the authors first examine the reality of AI and its applications in Islamic finance before exploring how it can evaluate and mitigate the risks inherent to these institutions. The qualitative methodology used is based on semi-structured interviews with eight risk directors from Moroccan participatory banks and windows. The interviews were transcribed and subjected to systematic thematic analysis. The coding process identified recurring themes, which were then grouped into broader categories to identify key trends and perceptions about the use of AI in counterparty risk management. The survey results reveal that none of the banks interviewed currently use AI for counterparty risk management, although they intend to introduce it in the future. The expected benefits include increased accuracy in risk assessment and process optimization through automation. However, potential obstacles include financial constraints and a shortage of AI expertise. Indeed, AI could present promising prospects for strengthening financial stability and ensuring Sharia compliance within participatory banks. For effective integration, investments in resources and AI training are necessary. Overall, the future of AI in counterparty risk management promises to bring innovation and operational efficiency to the participatory finance sector. |
| Abstract: | Le présent article cherche à analyser l'application de l'intelligence artificielle (IA) dans la gestion du risque de contrepartie, en se concentrant sur les banques participatives marocaines. Pour ce faire, les auteurs examinent d'abord la réalité de l'IA et ses applications dans la finance islamique avant d'explorer comment elle peut évaluer et atténuer les risques propres à ces institutions. La méthodologie qualitative retenue se base sur des entretiens semi-directifs avec huit directeurs des risques de banques et fenêtres participatives marocaines. Les entretiens ont été transcrits et soumis à une analyse thématique systématique. Le processus de codage a permis d'identifier des thèmes récurrents, regroupés ensuite en catégories plus larges, afin de dégager des tendances et des perceptions clés sur l'utilisation de l'IA dans la gestion du risque de contrepartie. Les résultats de l'enquête révèlent qu'aucune des banques interrogées n'utilise actuellement l'IA pour la gestion du risque de contrepartie, bien qu'ils aient l'intention de l'introduire dans un avenir proche. Les avantages attendus incluent une précision accrue dans l'évaluation des risques et une optimisation des processus grâce à l'automatisation. Cependant, les obstacles potentiels incluent des contraintes financières et une pénurie d'expertise en IA. En effet, l'IA pourrait présenter des perspectives prometteuses pour renforcer la stabilité financière et garantir la conformité à la Charia au sein des banques participatives. Pour une intégration efficace, des investissements dans les ressources et la formation en IA sont nécessaires. En somme, l'avenir de l'IA dans la gestion du risque de contrepartie promet d'introduire innovation et efficacité opérationnelle dans le secteur de la finance participative. |
| Keywords: | Artificial Intelligence AI, Participatory Finance, Risk management, Counterparty Credit Risk, Intelligence Artificielle, Finance Participative, Gestion des risques, Risque de contrepartie |
| Date: | 2024–09–02 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04690166 |
| By: | Mohamed Ben Alaya; Ahmed Kebaier; Djibril Sarr |
| Abstract: | This paper introduces a novel stochastic model for credit spreads. The stochastic approach leverages the diffusion of default intensities via a CIR++ model and is formulated within a risk-neutral probability space. Our research primarily addresses two gaps in the literature. The first is the lack of credit spread models founded on a stochastic basis that enables continuous modeling, as many existing models rely on factorial assumptions. The second is the limited availability of models that directly yield a term structure of credit spreads. An intermediate result of our model is the provision of a term structure for the prices of defaultable bonds. We present the model alongside an innovative, practical, and conservative calibration approach that minimizes the error between historical and theoretical volatilities of default intensities. We demonstrate the robustness of both the model and its calibration process by comparing its behavior to historical credit spread values. Our findings indicate that the model not only produces realistic credit spread term structure curves but also exhibits consistent diffusion over time. Additionally, the model accurately fits the initial term structure of implied survival probabilities and provides an analytical expression for the credit spread of any given maturity at any future time. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.09179 |
| By: | OECD |
| Abstract: | This paper examines the recent evolution of competition in the financial services sector in Latin America and the Caribbean (LAC), focusing on the rise of Fintechs and the emergence of a pro-competitive regulatory framework. This evolution results from a symbiosis of positive feedback between technology and regulation, which reinforce and balance each other in shaping a new era for the sector in the LAC region. Over the last decade, the financial sector in LAC has undergone profound changes, including the entry of new players, the emergence of new products and the reconfiguration of market boundaries. These developments have led to competitive gains and the provision of better, more accessible, customised and inclusive financial services. Regulatory advances have played a crucial role at various stages of this process, sometimes laying the groundwork, sometimes welcoming and protecting new technologies and models driven by financial digitalisation, and more recently, even leading and fostering disruptive innovations. Open Banking currently stands as a key element of this shared agenda, both regionally and globally, aimed at deepening market transformation towards greater competition, innovation and inclusion. |
| Date: | 2024–09–27 |
| URL: | https://d.repec.org/n?u=RePEc:oec:dafaac:313-en |
| By: | Ryoji Koike (Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: ryouji.koike@boj.or.jp)) |
| Abstract: | This paper overviews the developments of the Bank of Japan's balance sheet from the Meiji era to postwar reconstruction. The paper assesses balance sheet items in terms of both nominal values and ratios to nominal GNP, using semiannual and monthly data reassembled from historical materials. In the semiannual data, the ratio of total assets to GNP remained at 10-15 percent in peacetime but increased to 19-48 percent in wartime, whereas it was 16 percent at most during financial crises. Meanwhile, banknotes remained stable, at 8-11 percent, except in the Bank's early years and at end of the Pacific War in 1941-45. The monthly data capture short-term changes during financial crises and rapid changes in economic and financial institutions, such as the 1923 earthquake, the return to the gold standard in 1930, and the emergency measures in 1946 that voided old banknotes to reduce money in circulation. These data provide useful information for research in history fields such as the identification of exogenous shocks. |
| Keywords: | from the Meiji era to postwar reconstruction, the Bank of Japan's balance sheet, historical records, semiannual data, monthly data |
| JEL: | N25 Y10 E58 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:ime:imedps:24-e-07 |
| By: | Yu Zhang; Claudio Tessone |
| Abstract: | When analyzing Bitcoin users' balance distribution, we observed that it follows a log-normal pattern. Drawing parallels from the successful application of Gibrat's law of proportional growth in explaining city size and word frequency distributions, we tested whether the same principle could account for the log-normal distribution in Bitcoin balances. However, our calculations revealed that the exponent parameters in both the drift and variance terms deviate slightly from one. This suggests that Gibrat's proportional growth rule alone does not fully explain the log-normal distribution observed in Bitcoin users' balances. During our exploration, we discovered an intriguing phenomenon: Bitcoin users tend to fall into two distinct categories based on their behavior, which we refer to as ``poor" and ``wealthy" users. Poor users, who initially purchase only a small amount of Bitcoin, tend to buy more bitcoins first and then sell out all their holdings gradually over time. The certainty of selling all their coins is higher and higher with time. In contrast, wealthy users, who acquire a large amount of Bitcoin from the start, tend to sell off their holdings over time. The speed at which they sell their bitcoins is lower and lower over time and they will hold at least a small part of their initial holdings at last. Interestingly, the wealthier the user, the larger the proportion of their balance and the higher the certainty they tend to sell. This research provided an interesting perspective to explore bitcoin users' behaviors which may apply to other finance markets. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.10407 |
| By: | Lambert, Claudia; Larkou, Chloe; Pancaro, Cosimo; Pellicani, Antonella; Sintonen, Meri |
| Abstract: | By applying a structural demand model to unique consumer-level survey data from the euro area, we assess how different CBDC design options, combined with individual (revealed) preferences, influence the potential demand for a digital euro. Estimating the demand for a digital euro, we find that if it were unconstrained, it could range, in steady state, between 3-28% of household liquid assets or €0.12 - €1.11 trillion, depending on whether consumers would perceive the digital euro to be more cash-like or deposit-like. With an illustrative €3, 000 holding limit per person, it could instead range between 2-9% or €0.10 -€0.38 trillion. Privacy, automatic funding, and instant settlement raise its potential demand. JEL Classification: E41, E50, E58 |
| Keywords: | Central bank digital currency, demand estimation, design attributes, structural model |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242980 |
| By: | Dominic Cucic; Denis Gorea |
| Abstract: | We analyze the role of nonbank lenders in the transmission of monetary policy using data on the universe of unsecured credit to firms and households in Denmark. Nonbanks increase their credit supply after a monetary contraction, both relative to banks and in absolute terms. The nonbank credit expansion is driven by long-term debt funding flowing to nonbanks. The attenuation of the traditional bank lending channel of monetary policy has real effects: nonbank credit insulates corporate investment and household consumption from adverse consequences of monetary contractions. |
| Keywords: | monetary policy, nonbanks, shadow banks, banks, real effects |
| JEL: | E51 E52 G23 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1211 |
| By: | Claire Greene; Fumiko Hayashi; Alicia Lloro; Oz Shy; Joanna Stavins; Ying Lei Toh |
| Abstract: | US households that lack digital means of making and receiving payments cannot participate fully in an increasingly digitized economy. Assessing the scope of this problem and addressing it requires a definition of households that are underserved in digital payments. Traditional definitions of households underserved in the banking system—those that are unbanked and those that are underbanked—do not account for the ownership of nonbank transaction accounts that can be used to make and receive digital payments. In this paper, we define households underserved in digital payments by considering four key elements—access, use, safety, and affordability—and discuss how researchers may assess these elements to quantify the share of households underserved in digital payments. |
| Keywords: | digital payments; underserved; fintech; financial inclusion; nonbanks |
| JEL: | D12 D18 G21 G23 |
| Date: | 2024–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedbwp:98803 |
| By: | Antoine Ebeling |
| Abstract: | This paper study the impact of the European Central Bank’s (ECB) climate related speeches on European stock markets. Using the database of 2594 speeches between 1997 and 2022 of the European Central Bank, we employ advanced textual analysis techniques, including keyword identification and topic modeling, to isolate speeches related to climate change. We then conduct an event study to estimate the differences in abnormal returns of a large panel of listed companies in response to the European Central Bank’s speeches on climate change. Our analysis reveals that the ECB’s communication on climate issues has intensified significantly since 2015. Using topic modelling methods, we classify climate speeches into two main themes: (i) green finance and economic policies, and (ii) climate-related risks The event study shows that financial markets tend to reallocate portfolios towards greener ones in the days following the ECB’s climate speeches. Our results show that following a climatic speech by the ECB, green financial markets are benefiting from positive abnormal returns by around 1 percentage point. More specifically, we find that climate speeches dealing with green monetary policy and other economic policy instruments have a larger effect on green stock prices than speeches dealing with different types of climate risk. |
| Keywords: | Central bank communication ; Climate change ; Event Study ; Textual Analysis. |
| JEL: | E52 G14 Q54 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ulp:sbbeta:2024-38 |
| By: | Mosk, Benjamin; Vassallo, Danilo |
| Abstract: | This paper presents an event-study methodology that combines market data and survey-based probabilities to infer the full effect of a policy decision, as seen through the lens of financial markets. The market reaction to an event’s outcome reflects its surprise or announcement effect, and generally not its full effect. However, under certain conditions, the unobserved full effect can be derived from the observed surprise effect. Most importantly, the ex-ante probabilities of different outcomes must be known. We apply this methodology to a real-world example: the European Central Bank’s announcement of its third series of targeted longer-term refinancing operations (TLTROIII). The introduction of TLTROIII was highly anticipated, and therefore partially priced in, as market participants feared a “cliff effect” with the preceding operations under TLTROII coming due. We estimate the announcement’s full effect, focusing on its impact on a set of asset prices, as compared to a baseline wherein TLTROIII would not have been introduced. The full market impact surpasses the surprise effect by a factor of fifteen. We also find that the announcement had a highly heterogeneous impact on euro area sovereign bond yields. JEL Classification: G12, G13, G14 |
| Keywords: | event-study, targeted longer-term refinancing operations |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242982 |
| By: | Kubitza, Christian |
| Abstract: | Financial losses can have persistent effects on the financial system. This paper proposes an empirical measure for the duration of these effects, Spillover Persistence. I document that Spillover Persistence is strongly correlated with financial conditions; during banking crises, Spillover Persistence is higher, whereas in the run-up phase of stock market bubbles it is lower. Lower Spillover Persistence also associates with a more fragile system, e.g., a higher probability of future crises, consistent with the volatility paradox. The results emphasize the dynamics of loss spillovers as an important dimension of systemic risk and financial constraints as a key determinant of persistence. JEL Classification: E44, G01, G12, G20, G32 |
| Keywords: | asset price bubbles, financial crises, fire sales, fragility, systemic risk |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242981 |
| By: | Goldbach, Stefan; Nitsch, Volker |
| Abstract: | This paper explores a monetary experiment, the adoption of Bitcoin as legal tender in El Salvador in 2021, to analyze the impact of digital currencies on international capital flows. Using a difference-in-differences approach, we find that, instead of making transfers easier, El Salvador’s official cross-border financial activity has decreased after the monetary change. This finding may reflect an increase in uncertainty. However, it is also in line with findings that link digital assets to illegal activity as previously officially recorded financial transfers may have been replaced by unrecorded activities. |
| Date: | 2024–09–05 |
| URL: | https://d.repec.org/n?u=RePEc:dar:wpaper:149484 |
| By: | Pascal Bougssere (UV-BF - Université virtuelle du Burkna Faso); Mamadou Toe (UTS - Université Thomas Sankara); Wend-Kuuni Raïssa Yerbanga (UTS - Université Thomas Sankara) |
| Abstract: | This article examines the influence of microcredit financing conditions on the financial performance of microenterprises in Burkina Faso. To this end, an analysis was carried out using a linear model for a sample of 129 microenterprises based on panel data from 2017 to 2019. The results obtained using the Feasible Generalized Least Squares (FGLS) method show that the amount of microcredit and the repayment period have a positive impact on the financial performance of microenterprises. In contrast, the interest rate, proximity to microfinance institutions (MFIs) and the gender of the business owner negatively affect this performance. These results emphasize that in the Burkinabe context, proximity to MFIs does not guarantee the profitability of microenterprises, but rather benefits MFIs in repaying loans and expanding their portfolio. They also indicate that women-led micro-enterprises are less profitable because they have difficulties accessing credit, particularly due to a lack of collateral. Conversely, businesses run by educated owners have better financial performance. |
| Keywords: | Financing conditions, microcredit, microenterprise, financial performance |
| Date: | 2024–09–02 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04692353 |
| By: | Congressional Budget Office |
| Abstract: | To help make credit more available and affordable for borrowers, the federal government provides assistance in the form of loans and loan guarantees. Such credit assistance—which is projected to consist of $228 billion in new direct loans and $1.6 trillion in new loan guarantees in 2025, at an estimated cost of $2 billion—exposes the federal government to financial risk. In some cases, the gov¬ernment shares that risk with private lenders or investors. |
| JEL: | H80 H81 M40 M48 |
| Date: | 2024–09–13 |
| URL: | https://d.repec.org/n?u=RePEc:cbo:report:59408 |
| By: | Ozili, Peterson K |
| Abstract: | The finternet is an emerging concept in global finance. The finternet is a term used to describe financial systems that are interconnected to one another like the internet. The finternet is a vision of the financial system of the future and Africa cannot be left behind in the race to transition to the finternet. But for this to happen, there is a need to understand what the finternet really is, what it means for Africa, the benefit for African countries, the mechanisms that exist today that will bring Africa closer to the finternet and the changes that need to be made today to prepare African countries for the finternet. This article explores the concept of the finternet, its definitions, benefits, and the strategies to help African countries transition to the financial system of the future which is the finternet. |
| Keywords: | finternet, financial system, financial services, interconnectedness, Africa, African countries, internet |
| JEL: | G21 G22 G23 G24 O31 O33 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122166 |
| By: | Lin William Cong; Pulak Ghosh; Jiasun Li; Qihong Ruan |
| Abstract: | Using proprietary data from the predominant cryptocurrency exchange in India together with the country's Household Inflation Expectations Survey, we document a significantly positive association between inflation expectations and individual cryptocurrency purchases. Higher inflation expectations are also associated with more new investors in cryptocurrencies. We investigate investment heterogeneity in multiple dimensions, and find the effect to be concentrated in Bitcoin (BTC) and Tether (USDT) trading. The results are robust after controlling for speculative demand captured by surveys of investors' expected cryptocurrency returns, and admit causal interpretations as confirmed using multiple instrumental variables. Our findings provide direct evidence that households already adopt cryptocurrencies for inflation hedging, which in turn rationalizes their high adoption in developing countries without a globally dominant currency. |
| JEL: | G0 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32945 |
| By: | Pablo D. Azar; Adrian Casillas; Maryam Farboodi |
| Abstract: | This paper considers the “DeFi intermediation chain”—the market structure that underlies the creation and distribution of ETH, the native cryptocurrency of Ethereum—to examine how information asymmetry shapes intermediation rents. We argue that using proof-of-stake blockchain technology in DeFi leads to a novel limit to arbitrage, arising from the tension between arbitrageurs' privacy needs and blockchain transparency. Using a new dataset which distinguishes private and public transactions in Ethereum, we find that a 1% increase in private information advantage leads to a 1.4% increase in intermediaries' profit share. We develop a dynamic bargaining model that predicts information market power stems exclusively from participants' private information advantage. Our analysis illustrates how blockchain technology can sustain arbitrage opportunities despite low entry barriers. |
| JEL: | C83 D82 D86 G23 G29 L86 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32949 |
| By: | Mario Tamez; Hans Weenink; Akihiro Yoshinaga |
| Abstract: | Well-designed legal frameworks and institutional arrangments support the legitimacy of central banks’ autonomous decision-making when grounded on sound legal basis and can prevent over-stepping in the remit of other authorities. This paper explores the key legal intersections of climate change and central banks. Climate change could impact price and finanical stability, which are at the core of a central bank’s mandate. While central banks’ legal frameworks can support climate change efforts they also determine the boundaries of the measures they can adopt. Central banks need to assess their mandate and authority under their current legal frameworks when considering measures to contribute to the global response to climate change, while taking actions to fulfill their legal mandates. |
| Keywords: | Climate Change; Central Bank; Legal Framework |
| Date: | 2024–09–09 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/192 |
| By: | Rafael Guerra; Steven Kamin; John Kearns; Christian Upper; Aatman Vakil |
| Abstract: | This paper estimates empirical Taylor rules to analyze the recent monetary policy of the five main Latin American inflation-targeting central banks. We find that during the inflationary surge of 2021–23, monetary policy reacted more strongly and more quickly to changes in inflation than predicted by a standard linear Taylor rule, estimated on data from the pre-pandemic period. Although this appears to represent a shift in the monetary reaction function, we think it more likely that Latin American central banks have been following a non-linear strategy, responding more aggressively to inflation, the higher it rose. We confirmed this by adding the square of inflation to the Taylor rule model: its coefficient was positive and significant, indicating that policy interest rates exhibited a non-linear response to inflation, even during the pre-pandemic period, and the model did a better job of predicting the sharp rise in interest rates during 2021–23. |
| Keywords: | Latin America, central banks, monetary policy, Covid-19, interest rates |
| JEL: | E52 E58 E50 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1209 |
| By: | Ambler, Kate; Balana, Bedru; Bloem, Jeffrey R.; Maruyama, Eduardo; Olanrewaju, Opeyemi |
| Abstract: | Smallholder farmers must invest in agricultural inputs (i.e., seeds, chemicals, equipment, land, and labor) during the planting season before earning income from the sale of agricultural produce after harvest. Credit can help relax liquidity constraints. In rural Nigeria, access to credit is limited, especially formal credit from financial institutions. Less than a third of households in rural Nigeria report using credit and only two percent of rural households borrowed credit from formal financial institutions (EFInA 2020). The rest is borrowed informally from friends, family, or local money lenders. Credit can take many different forms. For example, credit can take the form of a cash loan, where funds are provided to a borrower to make an investment of any kind. Another common form of credit is when specific goods, for instance agricultural inputs, are provided in advance to a payment. In both cases, the borrower must pay back both the loan amount, and any interest incurred from the loan. We partnered with Crop2Cash, a digital financial technology startup company operating in Nigeria, to test take-up for these two forms of credit. |
| Keywords: | smallholders; farm inputs; income; agriculture; credit; loans; Southern Africa; Western Africa; Nigeria |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:cgiarp:152224 |
| By: | Lara Coulier; Alessio Reghezza |
| Abstract: | We match granular supervisory and credit register data to assess the implications of banks' exposure to interest rate risk on the monetary policy transmission to bank lending supply in the euro area. We exploit the largest and swiftest increase in interest rates since the creation of the euro and find that banks with a higher exposure to interest rate risk, i.e., with a larger duration gap after accounting for hedging, curtailed corporate lending more than their peers. Ceteris paribus, greater interest rate risk entails closer supervisory scrutiny and potential capital surcharges in the short term, and lower expected profitability and capital accumulation in the medium to long term. We then proceed to dissect banks' credit allocation and find that banks with higher net duration reshuffled their loan portfolio away from long-term loans in an attempt to limit the increase in interest rate risk and targeted their lending contraction to small and micro firms. Firms exposed to banks with a larger exposure to interest rate risk were unable to fully rebalance their borrowing needs with other lenders, thus experiencing a relatively larger decrease in total borrowing during the monetary tightening episode. |
| Keywords: | interest rate risk, duration gap, bank lending channel, financial stability |
| JEL: | E51 E52 G21 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1202 |
| By: | Beata Cichocka (Center for Global Development); Ian Mitchell (Center for Global Development) |
| Abstract: | This paper quantifies and evaluates China's bilateral, regional, and multilateral climate-related development finance from the Belt and Road Initiative's inception in 2013 until 2021, shedding light on its substantial but often opaque contributions. Our analysis suggests that China has provided an annual average of nearly $4 billion for climate to developing countries since 2013, totalling over $34 billion by 2021, primarily through bilateral channels through lending from its policy banks. Recently, China's climate finance through multilateral institutions has substantially increased. However, this increase has been coupled with declines in China’s bilateral climate-relevant finance, which fell from over $6 billion in 2017 to under $1 billion in 2021, outpacing the decline of China’s overall development finance. Separately, we find China has made significant ongoing fossil fuel investments in developing countries, amounting to over double its climate-relevant finance over the period. Since 2017, the Chinese government has made commitments to “green” its outward cooperation, and outbound fossil fuel finance fell below climate-related finance for the first time in 2021. Although China remains a “developing” country and recipient of climate finance, it is now a net provider of climate support, suggesting it is already positioned to contribute to a new UN climate finance goal to be agreed for beyond 2025. Overall, this paper seeks to contribute to debates on China’s role in the international climate finance architecture and emphasizes the potential for other development actors to further engage China in multilateral climate cooperation. |
| Date: | 2024–09–11 |
| URL: | https://d.repec.org/n?u=RePEc:cgd:ppaper:339 |
| By: | Sebastian Horn; David Mihalyi; Philipp Nickol; César Sosa-Padilla |
| Abstract: | How reliable are public debt statistics? This paper quantifies the magnitude, characteristics, and timing of hidden debt by tracking ex post data revisions across a comprehensive new database of more than 50 vintages of World Bank debt statistics. In a sample of debt data covering 146 countries and 53 years, the paper establishes three new stylized facts: (i) debt statistics are systematically under-reported; (ii) hidden debt accumulates in boom years and tends to be revealed in bad times, often during IMF programs and sovereign defaults; and (iii) in debt restructurings, higher hidden debt is associated with larger creditor losses. The novel data is used to numerically discipline a quantitative sovereign debt model with hidden debt accumulation and an endogenous monitoring decision that triggers revelations. Model simulations show that hidden debt has adverse effects on default risk, debt-carrying capacity and asset prices and is therefore welfare detrimental. |
| JEL: | F34 G01 H63 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:32947 |
| By: | Ms. Maria-Angels Oliva; Nika Khinashvili |
| Abstract: | In a 157 emerging markets and developing countries sample, remittances continue to grow fast, outpacing other financial inflows (as a share of GDP), particularly in Asia. Without alternative policy instruments, foreign exchange interventions (FXIs) have often been the authorities’ go-to tool to manage the short-term effects of these remittance inflows. However, this practice comes at a cost. This paper shows that FXIs are quick, temporary solutions that often may hinder the development of the recipient country’s financial sector and may not support financial stability over the medium term. The analysis suggests that FXIs act as an insurance tool that, by mitigating FX volatility, protect remittance recipients and tradable sectors from FX risks, encouraging less bank deposits (consistent with more spending) and lower buffers in the banking sector. These costs add to other direct FXI-related costs already identified in the literature. The development of private sector market risk management tools should support longer-term structural reforms required to increase the absorptive capacity of additional FX inflows. |
| Date: | 2024–09–06 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/191 |
| By: | Maarten van Rooij; Rob Alessie; Annamaria Lusardi |
| Abstract: | This paper surveys what we have learned on financial literacy and its relation to financial behavior from data collected in the Dutch Central Bank (DNB) Household Survey, a project done in collaboration with academics. A pioneering survey fielded in 2005 included an extensive set of financial literacy questions and questions that can serve as instruments for financial literacy in regression analyses to assess the causal effect of financial literacy on behavior. We describe how this survey spurred a series of research papers demonstrating the crucial role of financial literacy in stock market participation, retirement planning, and wealth accumulation. This inspired various follow-up studies and experiments based on new data collections in the DNB Household Survey. Researchers worldwide have used these data for innovative studies, and other surveys have included similar questions. This case study exemplifies the essential role of data in empirical research, showing how innovative data collections can inspire new research initiatives and significantly contribute to our understanding of household financial decisionmaking. |
| Keywords: | financial literacy; consumer financial decision-making; household finance; survey methodology; data collection methods; empirical analysis; |
| JEL: | G53 D14 D12 C81 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbwpp:815 |
| By: | Hiroyuki Fujiwara (Director and Senior Economist, Institute for Monetary and Economic Studies, Bank of Japan (E-mail: hiroyuki.fujiwara@boj.or.jp)) |
| Abstract: | The Flow of Funds Accounts (FFA) statistics are useful for understanding macroeconomic trends in the flow of funds and the financial structure of Japan. The Bank of Japan has compiled and published the FFA in Japan each fiscal year since 1953. For earlier years, stock tables prepared by researchers are available for the early Meiji period since 1871. This paper presents several representative series of Japan's long- term FFA since the Meiji period, and explains the transitions of the historical data against the background of changes in the economic structure, and the historical connectivity of the data arising from the review of compilation methods. It also reviews historical FFA statistics and the process of making necessary revisions. The main results obtained are as follows. Firstly, fluctuations in financial assets and liabilities and financial surplus or deficit (as ratio to nominal GDP) by sector during and shortly after World War II were much larger than in other periods, and shrank significantly after the war, resulting in a considerable resetting of the credit-debt relationship. Secondly, the credit aggregates and the net financial assets in recent years in the private sector, as well as the credit aggregates and the net financial liabilities in the public sector, have exceeded their pre-World War II peaks. Thirdly, the private sector's financial surplus and the public sector's financial deficit were larger at the time of the fiscal reform of 1877 in the early Meiji period and after the outbreak of the Second Sino-Japanese War in 1937 than in recent years. |
| Keywords: | Flow of Funds Accounts (FFA), Historical connectivity of the data, Ratio to nominal GDP, Stock and Flow tables, Credit Aggregates, Net Financial Assets, Financial Surplus or Deficit |
| JEL: | E51 G10 N15 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:ime:imedps:24-e-08 |
| By: | Shu Takahashi; Kento Yamamoto; Shumpei Kobayashi; Ryoma Kondo; Ryohei Hisano |
| Abstract: | The prediction of both the existence and weight of network links at future time points is essential as complex networks evolve over time. Traditional methods, such as vector autoregression and factor models, have been applied to small, dense networks, but become computationally impractical for large-scale, sparse, and complex networks. Some machine learning models address dynamic link prediction, but few address the simultaneous prediction of both link presence and weight. Therefore, we introduce a novel model that dynamically predicts link presence and weight by dividing the task into two sub-tasks: predicting remittance ratios and forecasting the total remittance volume. We use a self-attention mechanism that combines temporal-topological neighborhood features to predict remittance ratios and use a separate model to forecast the total remittance volume. We achieve the final prediction by multiplying the outputs of these models. We validated our approach using two real-world datasets: a cryptocurrency network and bank transfer network. |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2409.08718 |
| By: | Kristian S. Blickle; Evan Perry; João A. C. Santos |
| Abstract: | In support of the National Flood Insurance Program (NFIP), the Federal Emergency Management Agency (FEMA) creates flood maps that indicate areas with high flood risk, where mortgage applicants must buy flood insurance. The effects of flood insurance mandates were discussed in detail in a prior blog series. In 2021 alone, more than $200 billion worth of mortgages were originated in areas covered by a flood map. However, these maps are discrete, whereas the underlying flood risk may be continuous, and they are sometimes outdated. As a result, official flood maps may not fully capture the true flood risk an area faces. In this post, we make use of unique property-level mortgage data and find that in 2021, mortgages worth over $600 billion were originated in areas with high flood risk but no flood map. We examine what types of lenders are aware of this “unmapped” flood risk and how they adjust their lending practices. We find that—on average—lenders are more reluctant to lend in these unmapped yet risky regions. Those that do, such as nonbanks, are more aggressive at securitizing and selling off risky loans. |
| Keywords: | floods; climate change; mortgages |
| JEL: | G21 Q54 |
| Date: | 2024–09–25 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fednls:98848 |
| By: | Brzezinski, Adam; Palma, Nuno; Velde, François R. |
| Abstract: | Debates about the nature and economic role of money are mostly informed by evidence from the twentieth century, but money has existed for millennia. We argue that there are many lessons to be learned from monetary history that are relevant for current topics of policy relevance. The past is a source of evidence on how money works across different situations, helping to tease out features of money that do not depend on one time and place. A close reading of history also offers testing grounds for models of economic behavior and can thereby guide theories on how money is transmitted to the real economy. |
| Keywords: | identification in macroeconomics; monetary history; monetary policy; natural experiments; policy experiments |
| JEL: | E40 E50 N10 |
| Date: | 2024–08–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:125356 |
| By: | Kim, Minseong |
| Abstract: | We show that the first-order optimality conditions in the baseline New Keynesian model relating to central bank reserves become invalid due to a corner solution, with future budget constraints plus rational expectation requiring zero central bank reserves today even for a disequilibrium. The use of a multiple-agent variant does not resolve the issue. The corrected understanding of the baseline New Keynesian model supports the MMT view that despite endogenous money, HPM can be crucial for efficacy of monetary and government policies. We leave the question of whether a fully Post-Keynesian analysis invalidates such a conclusion to future works. |
| Date: | 2024–09–12 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:dzjsc |
| By: | Lavrič, Mitja; Lenarčič, Črt |
| Abstract: | In this paper, we focus on the analysis of the drivers of LSTI ratio dynamics. Against this backdrop, we try to bridge this gap by introducing an average synthetic LSTI calculation and examine how various factors affect the LSTI ratio of borrowers that took out consumer and housing loans in Slovenia based on monthly frequency data spanning from the beginning of 2020 to the end of 2023. We note that the general growth of the incomes of consumers who took out loans inhibited the growth of the average LSTI ratio. Factors affecting the LSTI ratio had an offsetting effect on the LSTI ratio of consumers who took out a consumer loan, while factors affecting the LSTI ratio caused an increase in the LSTI ratio of consumers who took out a housing loan. One of the more important factors that influenced the growth of the LSTI ratio of consumers who took out a housing loan was the increase in the interest rate for housing loans. |
| Keywords: | Macroprudential policy, LSTI Ratio, Borrower-Based Measures. |
| JEL: | C10 C40 E58 |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122036 |
| By: | Patrick T. Harker |
| Abstract: | Patrick T. Harker delivered a lecture to students at the Tulane University A.B. Freeman School of Business on the work and mission of the Federal Reserve Bank System. He discussed the varied career opportunities available at the Fed, noting that building “a more secure economic future that benefits all Americans requires attracting and retaining a diverse and dynamic set of individuals committed to service.” In discussing the Fed’s role in monetary policy, Harker emphasized the importance of data-driven decision-making, saying the Fed has remained “dependent on surveying all the available data and, importantly, taking a longer-look approach and not over- or under-reacting to one particular month or one particular dataset.” Harker additionally highlighted several collaborative, groundbreaking research projects conducted across the System, stating that “economic research goes far beyond monetary policy and into areas that can help us better understand the totality of life in our communities.” He concluded with thoughts on the increasing role of technology in the financial sector, citing the Fed’s efforts to assemble “teams needed to ensure that the sector’s future is safe and secure so that customers — and the global economy — can have faith in it.” |
| Date: | 2024–09–20 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpsp:98804 |
| By: | Umar Isah, Yahaya |
| Abstract: | The study investigates effect of monetary policy variables on performance of prices of stock in Nigeria. The study covered the period 1986 –2022. Data were generated from the Central Bank of Nigeria Statistical Bulletin, 2023 edition. The method of data analyses used are ARDL technique as All Share Index (ASI) was used to measure stock price, while explanatory variables included inflation rate (INF), Broad money supply (M2), Monetary Policy Rate (MPR) and Real exchange rate (REXR). The ARDL bound test result indicates a long run association between monetary policy variables and stock prices in Nigeria. The long run estimates shows that only real exchange rate has significant effect on stock prices further findings reveal that monetary policy rate has significant impact on prices in stock market. The findings inform the conclusion that most monetary policy variables do not create necessary directions in market prices in Nigeria and recommends that the Nigerian stock market cannot yet be regarded as good policy monetary policy channel in Nigeria as the market is yet to absorb monetary policy impulses to an extent that monetary policy tools and instruments may significantly influence its direction and development. |
| Keywords: | Monetary policy; stock market prices; Exchange rate; Money supply; ARDL |
| JEL: | G18 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122083 |
| By: | Velasco, Sofia |
| Abstract: | This paper introduces a Bayesian Quantile Factor Augmented VAR (BQFAVAR) to examine the asymmetric effects of monetary policy throughout the business cycle. Monte Carlo experiments demonstrate that the model effectively captures non-linearities in impulse responses. Analysis of aggregate responses to a contractionary monetary policy shock reveals that financial variables and industrial production exhibit more pronounced impacts during recessions compared to expansions, aligning with predictions from the ’financial accelerator’ propagation mechanism literature. Additionally, inflation displays a higher level of symmetry across economic conditions, consistent with households’ loss aversion in the context of reference-dependent preferences and central banks’ commitment to maintaining price stability. The examination of price rigidities at a granular level, employing sectoral prices and quantities, demonstrates that during recessions, the contractionary policy shock results in a more pronounced negative impact on quantities compared to expansions. This finding provides support for the notion of stronger downward than upward price rigidity, as suggested by ’menu-costs models’. JEL Classification: C11, C32, E32, E37, E52 |
| Keywords: | asymmetric effects of monetary policy, Bayesian Quantile VAR, disaggregate prices, FAVAR, non-linear models |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:ecb:ecbwps:20242983 |
| By: | Di Wu |
| Abstract: | In the context of financial credit risk evaluation, the fairness of machine learning models has become a critical concern, especially given the potential for biased predictions that disproportionately affect certain demographic groups. This study investigates the impact of data preprocessing, with a specific focus on Truncated Singular Value Decomposition (SVD), on the fairness and performance of probability of default models. Using a comprehensive dataset sourced from Kaggle, various preprocessing techniques, including SVD, were applied to assess their effect on model accuracy, discriminatory power, and fairness. |
| Date: | 2024–08 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2408.15452 |
| By: | Caterina Lepore; Mr. Junghwan Mok |
| Abstract: | We assess financial stability risks from floods in the Netherlands using a comprehensive set of flood scenarios considering different factors including geographical regions, flood types, climate conditions, return periods, and adaptation. The estimated damage from each flood scenario is used to calibrate the corresponding macro-financial scenario for bank stress tests. Our results show the importance of considering these heterogeneous factors when conducting physical climate risk stress tests, as the impact of floods on bank capital varies significantly by scenario. We find that climate change amplifies the adverse impact on banks’ capital, but stronger flood defenses in the Netherlands can help mitigate some impacts. Further, we find a non-linear relationship between flood damages and banks’ capital depletion, highlighting the importance of considering extreme scenarios. |
| Keywords: | Physical risk; flood scenario; banking stress test; climate risk analysis |
| Date: | 2024–09–13 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2024/197 |
| By: | Damane, Moeti |
| Abstract: | This study investigates the differential impacts of business and household credit on Lesotho’s economic performance using simultaneous quantile regression analysis. The results indicate that business credit significantly boosts real GDP, particularly at lower quantiles, while household credit consistently exerts a negative influence across all quantiles. These findings are corroborated by OLS regression and robustness checks using the novel method of moments quantile regression model. The study advocates for policies that enhance business credit access, regulate household credit, maintain robust financial regulation, promote economic diversification, and support balanced financial practices through financial literacy programs. Such measures are essential for leveraging the positive effects of business credit on economic growth and mitigating the adverse impacts of household credit, thereby fostering sustainable development in Lesotho |
| Keywords: | Credit Allocation, Economic Performance, Quantile Regression, Household Credit, Business Credit |
| JEL: | C21 G1 G28 O16 |
| Date: | 2024–09–08 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121954 |
| By: | Benison Thomas (Motu Economic and Public Policy Research); Trinh Le (Motu Economic and Public Policy Research) |
| Abstract: | Home equity release refers to financial products that allow people to access the equity that is tied up in their own homes. Home equity is a large part of household wealth in New Zealand, making it an important asset that could potentially be used to fund retirement. However, the take-up of equity release products such as reverse mortgages is very low. This research examines whether home equity release schemes currently available in the New Zealand market provide value for money and how they might provide a suitable form of retirement income for some people. The available data confirm the existence of many households with low retirement income and high housing wealth, highlighting those who stand to potentially gain from home equity release. Assessments of the features and costs of current home release schemes, alongside worked examples using realistic values, highlight the scenarios when home equity release may (or may not) be beneficial. Depending on current circumstances and future financial needs, home equity release may be a suitable form of retirement income for some retirees but not for others. |
| Keywords: | Home equity release; reverse mortgage; wealth decumulation; retirement |
| JEL: | J14 J26 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:mtu:wpaper:24_03 |
| By: | Catherine Casanova; Eugenio Cerutti; Swapan-Kumar Pradhan |
| Abstract: | While Chinese banks have become the top cross-border lender to EMDEs, their expansion has slowed recently, both in terms of volume and market share. Also, the strong correlation of China’s bilateral trade and its banks’ cross-border lending has weakened, while during 2020-22 lending became more positively correlated with FDI. In our paper, we analyse these patterns and we explore the role of borrower risk variables and foreign policies. Our findings show that, although the shifting correlation from trade to FDI is a general EMDE phenomenon, China’s Belt and Road Initiative reinforces it. By contrast, borrowers that potentially benefit from geoeconomic fragmentation do not display stronger FDI-lending relationships. We also find that Chinese banks exhibit different levels of risk tolerance relative to other bank nationalities as borrower country risk variables are positively correlated with Chinese banks’ market shares, but not with their amounts of cross-border lending. |
| Keywords: | cross-border lending, chinese banks, trade, FDI, borrower indebtedness, pandemic, sanctions, geoeconomic fragmentation |
| JEL: | F34 F36 F65 G21 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:bis:biswps:1213 |
| By: | Adong, Annet; Ambler, Kate; Bloem, Jeffrey R.; de Brauw, Alan; Herskowitz, Sylvan; Islam, AHM Saiful; Wagner, Julia |
| Abstract: | Intermediary firms within agri-food value chains operating between the farmgate and retailers typically account for at least as much, if not more, value added as the primary agricultural production sector of the economy, but little is known about how these small and largely informal firms conduct their business. Drawing on a set of innovative surveys implemented amid the arabica coffee and soybean value chains in Uganda and the rice and potato value chains in Bangladesh, we describe the financial activities of the firms that transform agricultural produce into food. We document four sets of results. First, across all intermediary actors in our data the overwhelming majority of transactions are cash-based. Second, although many intermediary actors are un-banked, access to financial accounts varies considerably by value chain segment, commodity, and country. Third, while most intermediary actors report using mobile money for personal purposes, especially in Uganda, very few use mobile money to facilitate business transactions. Fourth, although intermediary actors frequently report exposure to risk, very few effectively manage this risk. We conclude by discussing how intermediary agri-food value chain actors represent an underappreciated population for the promotion of new technologies both to improve the stability of the agricultural sector and to improve outcomes among smallholder farmers. |
| Keywords: | agrifood systems; finance; mobile phones; technology; value chains; Africa; Eastern Africa; Asia; Southern Asia; Bangladesh; Uganda |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:fpr:ifprid:2266 |
| By: | Victoria Dimond (Center for Global Development); Roland Rajah (Lowy Institute); Georgia Hammersley (Lowy Institute) |
| Abstract: | The World Bank’s concessional lending arm, the International Development Association (IDA), provides significant assistance to small states for fostering long-term development and responding to climate change. Around half of all small states have access to IDA. While only 3 percent of IDA’s resources go to small states, these countries comprise nearly a third of IDA-eligible countries. IDA plays a large role in the external financing of these countries, making up a third of official development assistance. The IDA Small States Exception plays a critical function in providing these countries access to IDA, and we argue accounts for the climate vulnerability faced by small states compared to alternative proposals being explored. We show that small states use IDA for adaptation to a greater extent than non-small states and, given large unmet financing needs, discuss how IDA might scale up its adaptation finance to these countries. We evaluate recent World Bank initiatives to scale up disaster finance and conclude with a discussion of key aspects for small states within the World Bank’s SimplifIDA reforms. |
| Date: | 2024–09–04 |
| URL: | https://d.repec.org/n?u=RePEc:cgd:ppaper:335 |