nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2018‒05‒28
five papers chosen by
Georg Man

  1. Insurance Activity and Economic Performance: Fresh Evidence from Asymmetric Panel Causality Tests By Abdulnasser Hatemi-J; Chi-Chuan Lee; Chien-Chiang Lee; Rangan Gupta
  2. Malawi; Selected Issues By International Monetary Fund
  3. No Pain, No Gain. Multinational Banks in the Business Cycle By Cao, Qingqing; Minetti, Raoul; Olivero, Maria
  4. How does access to formal finance affect household welfare dynamics? Micro evidence from Nigeria By Olabimtan Adebowale and David Lawson
  5. The Contribution of Formal and Non-formal Finance to Household Welfare: Evidence from South Africa By Lwanga Elizabeth Nanziri

  1. By: Abdulnasser Hatemi-J (Department of Economics and Finance, UAE University, Al Ain, United Arab Emirates); Chi-Chuan Lee (School of Management, Beijing Normal University Zhuhai, Zhuhai, China); Chien-Chiang Lee (Department of Finance, National Sun Yat-sen University, Kaohsiung, Taiwan); Rangan Gupta (Department of Economics, University of Pretoria, Pretoria, South Africa)
    Abstract: Insurance plays a fundamental role in any modern economy, but the literature has not accounted for the potential asymmetric causal impacts from the dynamic interaction between the insurance market and economic performance. This paper aims to fill this gap by studying the causal relationship between several measures of insurance per capita and real GDP per capita in the G7 countries over the period 1980-2014 via asymmetric panel causality tests. Our results show that insurance market activity and economic performance exhibit bidirectional causalities, but their direction, intensity, and significance are different due to distinct market situations. In general, insurance activity plays a passive role on economic performance, while economic performance has an aggressive role on insurance activity. These findings offer several useful insights for policy-makers and researchers.
    Keywords: Insurance market activity, GDP per capita, Asymmetric panel causality, G7 countries
    JEL: C33 G22 O16
    Date: 2018–05
  2. By: International Monetary Fund
    Abstract: Selected Issues
    Date: 2018–05–09
  3. By: Cao, Qingqing (Michigan State University); Minetti, Raoul (Michigan State University); Olivero, Maria (Drexel University)
    Abstract: We study the role of multinational banks in the propagation of business cycles in host countries. In our economy, multinational banks can transfer liquidity across borders through internal capital markets. However, their scarce knowledge of local firms' collateral hinders their allocation of liquidity to firms. We find that, through the interaction between the "liquidity origination" advantage and the "liquidity allocation" disadvantage, multinational banks can act as a short-run stabilizer in the immediate aftermath of domestic liquidity shocks but be a drag on the subsequent recovery. Structural and cyclical policies can ameliorate the trade-off induced by the presence of multinational banks effective stabilization tool.
    Keywords: Multinational Banks; Macroeconomic Stability; Business Cycle
    JEL: E44
    Date: 2018–02–14
  4. By: Olabimtan Adebowale and David Lawson
    Abstract: Abstract The relationship between access to formal finance and poverty reduction lies at the heart of the development literature and policy discourse, particularly in developing countries, where access to financial services is often argued to have poverty-alleviating potential. Most of the stylised theoretical literature and empirical evidence, however, focus their efforts on the poverty-alleviating potential of access to finance at a given point in time, which ignores the dynamic and multidimensional nature of poverty. Using a nationally representative panel data set of households, this paper explores the effect of access to formal finance on household welfare dynamics in Nigeria between 2010–11 and 2012–13. Applying a bivariate probit model, which addresses the endogenous selection associated with households’ initial welfare status, our estimates indicate that controlling for the exogeneity of initial household status is relevant when exploring the implications of access to finance for welfare dynamics in Nigeria, as the exogenous treatment of the initial conditioning may distort the correlation coefficients of our estimates. Our results suggest that access to formal finance has poverty-reducing effects, as we found that initially poor households with access to finance were less likely to remain poor in the subsequent period. Also, initially non-poor households with access to finance were seen to face a lower probability of descending into poverty over the period, thus suggesting that access to finance plays a significant role in reducing transient poverty.
    Date: 2018
  5. By: Lwanga Elizabeth Nanziri
    Abstract: Access to finance has been identified as a tool in the fight against poverty and inequality. While efforts have been made to ensure that affordable formal financial services are accessible, the use of alternative non-formal mechanisms persists in many developing economies and thus compromises the potential gains from financial inclusion. Using a dataset from the FinScope surveys on South Africa, this paper investigates whether welfare outcomes of users of formal financial services and users of alternative non-formal financial services differ. Results, based on panel and treatment effect techniques show that the use of formal and semi-formal financial services leads to positive and significant welfare outcomes which are measured using an asset and well-being index. While these positive outcomes persist beyond the immediate period following the use of formal financial services, there is no such effect when one uses non-formal financial services. An attempt is made to contextualise these results for financial inclusion.
    Keywords: Financial Inclusion; Recentered Influence Function; Social Grants; South Africa; Welfare
    JEL: G2 I3
    Date: 2018

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