nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2018‒04‒09
five papers chosen by
Georg Man

  1. Collateral and Development By Nicola Amendola; Lorenzo Carbonari; Leo Ferraris
  2. Premature financialization: a conceptual exploration By Hugh Whittaker
  3. Asset Bubbles and Global Imbalances By Ikeda, Daisuke; Phan, Toan
  4. Credit supply and productivity growth By Francesco Manaresi; Nicola Pierri
  5. A Toolkit to Assess the Consistency Between Real Sector and Financial Sector Forecasts By Sophia Chen; Paola Ganum; Pau Rabanal

  1. By: Nicola Amendola (CEIS & DEF, University of Rome "Tor Vergata"); Lorenzo Carbonari (CEIS & DEF, University of Rome "Tor Vergata"); Leo Ferraris (CEIS & DEF, University of Rome "Tor Vergata")
    Abstract: This paper presents a model economy with endogenous credit constraints and endogenous growth, in which agents face a trade-off between investing resources to improve the pledgeability of collateral assets and the accumulation of human capital. The model generates both growth miracles and stagnant economies.
    Keywords: Credit,Collateral,Human Capital,Growth.
    JEL: G0 O1 O40
    Date: 2018–02–20
  2. By: Hugh Whittaker (FFJ - Fondation France-Japon de l'EHESS - EHESS - École des hautes études en sciences sociales)
    Abstract: This paper reviews some of the recent writing on financialization and its effects in developing countries. Acknowledging the positive role of finance in development, it argues that beyond a certain point of ‘financial deepening’ there are negative consequences. Financialization affects the economy, and also the state. In developing countries financialization does not necessarily follow a long period of industrialization, but may happen simultaneously with it, and indeed may be linked to ‘premature de-industrialization.’ From this perspective, namely of timing, it may also be meaningful to talk of ‘premature financialization.’
    Keywords: financialization, development, premature deindustrialization
    Date: 2017–01–19
  3. By: Ikeda, Daisuke (Bank of England); Phan, Toan (Federal Reserve Bank of Richmond)
    Abstract: We analyze the relationships between bubbles, capital flows, and economic activities in a rational bubble model with two large open economies. We establish a reinforcing relationship between global imbalances and bubbles. Capital flows from South to North facilitate the emergence and the size of bubbles in the North. Bubbles in the North in turn facilitate South-to-North capital flows. The model can simultaneously explain several stylized features of recent bubble episodes.
    Keywords: Rational bubbles; global imbalances; financial frictions; credit boom
    JEL: F32 F41 F44
    Date: 2018–03–23
  4. By: Francesco Manaresi; Nicola Pierri
    Abstract: We study the impact of bank credit supply on firm output and productivity. By exploiting a matched firm-bank database which covers all the credit relationships of Italian corporations over more than a decade, we measure idiosyncratic supply-side shocks to firms' credit availability. We use our data to estimate a production model augmented with financial frictions and show that an expansion in credit supply leads firms to increase both their inputs and their output (value added and revenues) for a given level of inputs. Our estimates imply that a credit crunch will be followed by a productivity slowdown, as experienced by most OECD countries after the Great Recession. Quantitatively, the credit contraction between 2007 and 2009 could account for about a quarter of the observed decline in Italy's total factor productivity growth. The results are robust to an alternative measurement of credit supply shocks that uses the 2007-08 interbank market freeze as a natural experiment to control for assortative matching between borrowers and lenders. Finally, we investigate possible channels: access to credit fosters IT-adoption, innovation, exporting, and the adoption of superior management practices.
    Keywords: credit supply, productivity, export, management, IT adoption
    JEL: D22 D24 G21
    Date: 2018–03
  5. By: Sophia Chen; Paola Ganum; Pau Rabanal
    Abstract: e develop a toolkit to assess the consistency between real sector and financial sector forecasts. The toolkit draws upon empirical regularities on real sector and financial sector outcomes for 182 economies from 1980 to 2015. We show that credit growth is positively correlated with real sector performance, in particular when credit growth is unusually high or low. However, the relationship between credit growth and inflation is weak. These results hold for different country groups, including advanced economies, emerging markets and low-income countries. Combining credit growth with other variables such as house prices and the output gap helps to understand real sector outcomes. But including the financial account balance does not make a difference.
    Date: 2017–06–05

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