nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2017‒05‒21
three papers chosen by
Georg Man

  1. Non-linearities in the Relationship between Finance and Growth By Ugo Panizza
  2. The effect of financial inclusion on welfare in sub-Saharan Africa: Evidence from disaggregated data By Anthanasius Fomum Tita; Meshach Jesse Aziakpono
  3. Understanding the Use of Long-term Finance in Developing Economies By Maria Soledad Martinez Peria; Sergio L. Schmukler

  1. By: Ugo Panizza (IHEID, Graduate Institute of International and Development Studies, Geneva)
    Abstract: This paper reviews the empirical literature on the links between ?finance and growth with a special focus on the empirical literature that has shown that the marginal contribution of fi?nancial depth to economic growth becomes negative in countries with large fi?nancial sectors (the too much fi?nance? result). It then assesses the empirical and theoretical validity of recent criticisms to this literature and concludes by discussing avenues for future research aimed at identifying the channels through which a very large ?financial sector can slow down economic growth.
    Keywords: Financial development; Finance-growth Nexus; Too much finance
    JEL: G10 O16 F36 O40
    Date: 2017–05
  2. By: Anthanasius Fomum Tita; Meshach Jesse Aziakpono
    Abstract: Over two decades sub-Saharan Africa has grown an average by 4.8% per annum. A trend called “Africa rising in the literature†but this robust economic growth seem to have benefited only a minority of elite individuals as poverty in the region remains high and income inequality continues to rise. Critics attribute this to a lack of financial inclusion. This study analyses the relationship between various aspects of financial inclusion and income inequality in sub-Saharan African using the Findex 2011 dataset with the intention to determine which aspects of financial inclusion have the greatest effect on income inequality.Our results show that formal account use for business, electronic payments and formal savings have a positive relationship with income inequality. This possibly reflects the low level of financial inclusion in the region. Furthermore, the positive relationship may suggest that owning a formal account does not necessarily lead to improvement in access to credit. That is, most of the account owners are likely first time users and problems such as moral hazard and information asymmetries, which are associated with a lack of financial infrastructure in the region still holds. This is likely to encourage banks to hold excess liquidity and thus grant fewer loans. The study accordingly recommends efforts to increase financial inclusion as well as reduce excess liquidity in the banking system through the development of financial infrastructure in order to encourage banks to support economic activities through lending.
    Keywords: financial inclusion, financial institutions, financial services, welfare and poverty
    JEL: D6 G2 O1 I3
    Date: 2017–05
  3. By: Maria Soledad Martinez Peria; Sergio L. Schmukler
    Abstract: This short paper reviews recent literature on the use of long-term finance in developing economies (relative to advanced ones) to identify where long-term financing occurs, and what role different financial intermediaries and markets play in extending this type of financing. Although banks are the most important providers of credit, they do not seem to offer long-term financing. Capital markets have grown since the 1990s and can provide financing at fairly long terms. But few firms use these markets. Only some institutional investors provide funding at long-term maturities. Governments might help to expand long-term financing, although with limited policy tools.
    Keywords: Financial crises;Financial crises;Financial intermediaries;Banks;Bond markets;International financial markets;firm financing, institutional investors, issuance maturity, long-term debt, short-term debt, Globalization: Finance, General, General, Portfolio Choice, Government Policy and Regulation, General, Government Policy and Regulation
    Date: 2017–04–26

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