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on Financial Development and Growth |
| By: | Hiroko Oura; Andreas Jobst; Charles Frederick Kramer; Catriona Purfield |
| Abstract: | Asian equity markets have grown significantly in size since the early 1990s, driven by strong international investor inflows, growing regional financial integration, capital account liberalization, and structural improvements to markets. The development of equity markets provides a more diversified set of channels for financial intermediation to support growth, thus bolstering medium-term financial stability. At the same time, as highlighted by the May-June 2006 market corrections, the increasing role of stock markets potentially changes the nature of macroeconomic and financial stability risks, as well as the policy requirements for dealing with these risks. |
| Keywords: | Equity markets , Asian financial markets , financial integration , financial stability , international capital markets , Stock markets , Asia , Capital markets , Financial stability , International capital markets , |
| Date: | 2006–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/266&r=fdg |
| By: | Kenichi Ueda |
| Abstract: | This paper formally identifies an important role of banks: Banks competitively internalize production externalities and facilitate economic growth. I formulate a canonical growth model with externalities as a game among consumers, firms, and banks. Banks compete for deposits to seek monopoly profits, including externalities. Using loan contracts that specify price and quantity, banks control firms' investments. Each bank forms a firm group endogenously and internalizes externalities directly within a firm group and indirectly across firm groups. This unique equilibrium requires a condition that separates competition for sources and uses of funds. I present a realistic institution that satisfies this condition. |
| Keywords: | Bank-oriented financial system , bank control , firm group , economic growth , Banks , Financial systems , Economic growth , Economic models , |
| Date: | 2006–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/264&r=fdg |
| By: | Charles Amo Yartey |
| Abstract: | This paper examines the role of financial development and financial structure in explaining cross-country diffusion of information communication technology (ICT). Using panel data for 76 emerging and advanced countries for the period 1990-2003, the paper finds that credit and stock market development tends to foster ICT development. Financial structure, however, does not appear to have any significant relationship with ICT development. The conclusions of the paper highlight the role of financial development in the market for knowledge-based products, and are consistent with theoretical predictions. The finding that financial development is an important determinant of ICT development implies that countries with underdeveloped financial markets may continue to lag behind in the use of ICT. |
| Keywords: | ICT , digital divide , financial development , financial structure , Information technology , Financial systems , Development , Capital markets , Economic models , |
| Date: | 2006–11–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/258&r=fdg |
| By: | Celine Rochon; Andrew Feltenstein |
| Abstract: | In this paper, we study the impact of labor market restructuring and foreign direct investment on the banking sector, using a dynamic general equilibrium model with a financial sector. Numerical simulations are performed using stylized Chinese data, and banks failures are generated through increases in the growth rate of the labor force, a revaluation of the exchange rate or an increase in debt issue to finance the government deficit, as compared to a benchmark scenario in which banks remain solvent. Thus bank failures can result from what might seem to be either beneficial economic trends, or correct monetary and fiscal policies. We introduce fiscal policies that modify relative factor prices by lowering the capital tax rate and increasing the tax rate on labor. Such policies can prevent banking failures by raising the return to capital. It is shown that such fiscal policies are, in the short run, welfare reducing. |
| Keywords: | Banking failures , fiscal policies , Banking , China , Fiscal policy , Tax rates , Labor markets , Foreign investment , Economic models , |
| Date: | 2006–11–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:06/263&r=fdg |