nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2018‒03‒12
five papers chosen by
Georg Man

  1. Cooperative banks and local economic growth By Paolo Coccorese; Sherrill Shaffer
  2. On the direct and indirect real effects of credit supply shocks By Laura Alfaro; Manuel García-Santana; Enrique Moral-Benito
  3. US financial shocks and the distribution of income and consumption in the UK By Haroon Mumtaz; Konstantinos Theodoridis
  4. Financial vs. Policy Uncertainty in Emerging Market Economies By Sangyup Choi; Myungkyu Shim
  5. Private saving. New cross-country evidencebased on bayesian techniques By Ignacio Hernando; Irene Pablos; Daniel Santabárbara; Javier Vallés

  1. By: Paolo Coccorese; Sherrill Shaffer
    Abstract: In this paper we study the impact of cooperative banks on local economic development. Working on Italian municipality data in the period 2001-2011, we find that this type of banks plays a distinct role in enhanced local economic performance – particularly income, employment and firms’ birth growth rates – and that their presence is more effective compared to conventional banks. This evidence upholds the view that their more widespread presence would be beneficial, especially in those areas that suffer from lower economic growth, and accords with other studies underlining the decisive role of cooperative banks in supporting traditional credit provision to local borrowers.
    Keywords: Cooperative banks, Growth, Municipalities, Economic performance
    JEL: G21 O4 R11
    Date: 2018–02
  2. By: Laura Alfaro (Harvard Business School And Nber); Manuel García-Santana (Upf, Barcelona Gse, and Cepr); Enrique Moral-Benito (Banco de España)
    Abstract: We consider the real effects of bank lending shocks and how they permeate the economy through buyer-supplier linkages. We combine administrative data on all fi rms in Spain with a matched bank-fi rm-loan dataset incorporating information on the universe of corporate loans for 2003-2013. Using methods from the matched employer-employee literature for handling large data sets, we identify bank-specifi c shocks for each year in our sample. Combining the Spanish Input-Output structure and fi rm-specifi c measures of upstream and downstream exposure, we construct fi rm-specifi c exogenous credit supply shocks and estimate their direct and indirect effects on real activity. Credit supply shocks have sizable direct and downstream propagation effects on investment and output throughout the period but no signifi cant impact on employment during the expansion period. Downstream propagation effects are comparable or even larger in magnitude than direct effects. The results corroborate the importance of network effects in quantifying the real effects of credit shocks and show that real effects vary during booms and busts.
    Keywords: bank-lending channel, employment, investment, output, matched employeremployee, input-output linkages
    JEL: E44 G21 L25
    Date: 2018–03
  3. By: Haroon Mumtaz (Queen Mary University of London); Konstantinos Theodoridis (Cardiff Business School)
    Abstract: We show that US financial shocks have an impact on the distribution of UK income and consumption. Households with higher income and higher levels of consumption are affected more by this shock than households located towards the lower end of these distributions. An estimated multiple agent DSGE model suggests that the heterogeneity in the household responses can be explained by the different levels of access to financial markets. We find that this heterogeneity magnifies the effect of this shock on aggregate output.
    Keywords: FAVAR, DSGE model, Financial Shock
    JEL: D31 E32 E44
    Date: 2018–01–29
  4. By: Sangyup Choi (Yonsei University); Myungkyu Shim (Sogang University)
    Abstract: While the negative effect of uncertainty shocks on the economy is well-known, little is known about the extent to which these e ects di er across the measures of uncertainty, especially in emerging market economies. Using the newly available economic policy uncertainty index from six emerging market economies (Brazil, Chile, China, India, Korea, and Russia), we compare the impact of financial uncertainty shocks|measured by stock market volatility|and that of policy uncertainty shocks on the economy. We find that nancial uncertainty shocks have much larger and more significant impact on output than policy uncertainty shocks, except for China where the government has direct controls over financial markets. While our finding differs from the previous finding that policy uncertainty has no smaller effects on economic activity than nancial uncertainty in advanced economies, it is consistent with the recent emphasis on nancial frictions as a propagation mechanism of uncertainty shocks.
    Keywords: Financial uncertainty, Policy uncertainty, Emerging market economies, Financial frictions, Vector Autoregressions, Local projections
    JEL: E20 E32
    Date: 2018–03
  5. By: Ignacio Hernando (Banco de España); Irene Pablos (European Central Bank); Daniel Santabárbara (Banco de España); Javier Vallés (Banco de España)
    Abstract: The existing literature exhibits high uncertainty over the theoretical and empirical determinants of private world saving. This paper reports new evidence on the drivers of private saving by applying Bayesian techniques, using data from the world’s 35 largest economies in the period 1980-2012. After reviewing the main theories of consumption and saving decisions, and discussing the potential effects of different determinants, we specify a general model that incorporates the most commonly used factors in the literature, considering the potential endogeneity of some of the regressors. The Bayesian Model Averaging (BMA) approach summarises the information embedded in all combinations of the explanatory variables considered by averaging each specification according to its likelihood. We find that in the medium term private credit to GDP ratio, the government surplus to GDP ratio, the terms of trade, life expectancy and the old-age dependency ratio are key determinants of cross-country private saving behaviour. Lastly, we assess the long-term effect of expected demographic changes in private saving globally.
    Keywords: consumption, saving, national saving, private saving, household saving, Bayesian model averaging, model uncertainty
    JEL: C11 C23 E21 H30
    Date: 2018–01

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