nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2019‒06‒10
twelve papers chosen by
Georg Man

  1. Remittances, Finance and Industrialisation in Africa By Uchenna Efobi; Simplice A. Asongu; Chinelo Okafor; Vanessa Tchamyou; Belmondo Tanankem
  2. Relaxing credit constraints in emerging economies: the impact of public loans on the productivity of Brazilian manufacturers By Lage de Sousa, Filipe; Ottaviano, Gianmarco I. P.
  3. IDE chinois et croissance économique des pays d'Afrique sub-saharienne : méthode PIM et régression quantile des données en panel By Fred Eka
  4. IDE chinois et croissance économique des pays d'Afrique sub-saharienne : approche par la MMG en données de panel By Fred Eka
  5. Financial Integration and the Global Effects of China's Growth Surge By Rod Tyers; Yixiao Zhou
  6. Growth Surge: How Private Equity Can Scale Up Firms and the Economy By Daniel Schwanen; Jeremy Kronick; Farah Omran
  7. The persistent institutional effect of liberal colonialism: Evidence from China's financial policies By Fu, Tong; Wei, Zhongmei; Jian, Ze
  8. Bank capital in the short and in the long run By Mendicino, Caterina; Nikolov, Kalin; Suarez, Javier; Supera, Dominik
  9. Adverse Selection, Lemons Shocks and Business Cycles By Ikeda, Daisuke
  10. The Tortuga disease: the perverse effects of illicit foreign capital By Jablonski, Ryan S.; Oliver, Steven; Hastings, Justin V.
  11. Revisiting the Finance-Inequality Nexus in a Panel of African Countries By Christelle Meniago; Simplice A. Asongu
  12. Informal Sector and Mobile Financial Services in Developing Countries: Does Financial Innovation Matter? By Luc Jacolin; Massil Keneck; Alphonse Noah

  1. By: Uchenna Efobi (Covenant University, Ota, Ogun State, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon); Chinelo Okafor (Covenant University, Ota, Ogun State, Nigeria); Vanessa Tchamyou (University of Antwerp, Antwerp, Belgium); Belmondo Tanankem (MINEPAT, Cameroon)
    Abstract: The paper assesses how remittances directly and indirectly affect industrialisation using a panel of 49 African countries for the period 1980-2014. The indirect impact is assessed through financial development channels. The empirical evidence is based on three interactive and non-interactive simultaneity-robust estimation techniques, namely: (i) Instrumental Fixed Effects (FE) to control for the unobserved heterogeneity; (ii) Generalised Method of Moments (GMM) to control for persistence in industrialisation and (iii) Instrumental Quantile Regressions (QR) to account for initial levels of industrialisation. The non-interactive specification elucidates direct effects of remittances on industrialisation whereas interactive specifications explain indirect impacts. The findings broadly show that for certain initial levels of industrialisation, remittances can drive industrialisation through the financial development mechanism. Policy implications are discussed.
    Keywords: Africa; Diaspora; Financial development; Industrialisation; Remittances
    JEL: F24 F43 G20 O55
    Date: 2019–01
  2. By: Lage de Sousa, Filipe; Ottaviano, Gianmarco I. P.
    Abstract: In emerging economies credit constraints are often perceived as one of the most important market frictions hampering firm productivity growth in manufacturing. Huge amount of public money is devoted to the removal of such constraints but its effectiveness is still subject to an intense policy debate. This paper contributes to this debate by analyzing the effects of the Brazilian Development Bank (BNDES) loans. Exploiting the unique features of a dataset on BNDES loans to Brazilian manufactures, it finds that credit constraints facing Brazilian manufacturing firms are real, in particular for firms that apply to BNDES repeatedly, and BNDES support has allowed granted firms to match the performance of similar unconstrained firms but not to outperform them.
    Keywords: Credit constraints; Firm productivity; Public loans; BNDES
    JEL: G28 H25 O38
    Date: 2017–11–15
  3. By: Fred Eka (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)
    Abstract: Cet article explore l'incidence des flux d'investissement chinois sur le taux de croissance de 49 pays d'ASS sur la période allant de 2003 à 2016. Nous allons mettre en exergue les propriétés d'un estimateur de régressions quantiles sur données de panel. La stratégie d'estimation consiste à construire le stock de capital à travers la méthode de l'inventaire perpétuel (PIM). L'estimateur quantile présente l'avantage d'être robuste en cas de valeurs abbérantes et/ou erreurs dispersées car il pénalise moins les écarts. Nous allons appliquer la stratégie d'estimation appropriée (I. Canay, 2011) afin de neutraliser le problème économétrique de « paramètres incidents ». À travers le constat du différentiel positif entre les coefficients d'intérêt des deux modèles, nos résultats confirment un impact positif des investissements chinois sur le PIB par tête en ASS qui demeure limité.
    Keywords: IDE chinois,PIB par tête,Afrique sub-saharienne,données de panel,méthode PIM,régression quantile,estimateur en deux étapes,paramètres incidents
    Date: 2019–02
  4. By: Fred Eka (CATT - Centre d'Analyse Théorique et de Traitement des données économiques - UPPA - Université de Pau et des Pays de l'Adour)
    Abstract: L'objectif de ce papier est de déterminer l'incidence des flux d'investissement chinois sur le taux de croissance des 49 pays d'ASS sur la période allant de 2003 à 2017. Pour cela, nous avons essayé d'expliquer la dynamique des IDE chinois en ASS en utilisant dans notre modélisation des techniques d'estimation sur données de panel (estimations statique et dynamique). Ces techniques notamment les panels dynamiques permettent de mieux apprécier la nature de la relation entre les variables étudiées. Les résultats montrent que l'IDE chinois a un effet positif mais très faible sur le taux de croissance économique des pays d'ASS car il est très orienté vers les secteurs d'extraction des matières premières (mines, bois et mines…) qui créent moins d'emploi local et ne permettent pas de vrai transfert de technologie, malgré la création de quelques co-entreprises et joint-ventures entre les entreprises chinoises et firmes locales des pays africains.
    Keywords: IDE chinois,PIB par tête,Afrique sub-saharienne,données de panel,MMG
    Date: 2019–02
  5. By: Rod Tyers (Economics Programme, University of Western Australia); Yixiao Zhou (Crawford School of Public Policy, Australian National University)
    Abstract: China's financial openness, as measured by cross border flows and asset ownership, peaked during its 2000s growth surge, as did downward pressure on global interest rates and price levels. This was despite China's restriction of financial inflows to approved FDI and tight controls on private outflows. We analyze the global effects of the growth surge and their dependence on these financial policies by employing a global macro model with national portfolio rebalancing, in which flexibility in asset differentiation is used to index financial integration. The results suggest that, globally, the growth surge raised asset prices, reduced yields and bolstered deflationary pressures, while improving aggregate economic welfare. It is shown that, without capital controls, most surge effects on China would have been moderated substantially while the global impacts would have been larger.
    Keywords: Financial integration, China, imbalances, saving, monetary policy, spill-overs
    JEL: F42 F43 F47
    Date: 2019
  6. By: Daniel Schwanen (C.D. Howe Institute); Jeremy Kronick (C.D. Howe Institute); Farah Omran (C.D. Howe Institute)
    Keywords: Financial Services and Regulation; Business and Capital Taxation;Business Investment;Capital Markets;Venture Capital
    JEL: G32 G28 O16
    Date: 2019–05
  7. By: Fu, Tong; Wei, Zhongmei; Jian, Ze
    Abstract: The effect of liberal colonialism on the allocation of capital persists to this day. As Lange et al. (Colonialism and development: A comparative analysis of Spanish and British colonies. 2006) define and suggest, the authors exploit the colonial history of China during 1896-1911 with qualitative evidence to measure liberal colonialism. They document that liberal colonialism promotes the subsequent efficiency of financial policies on capital allocation in 2004 through the quality of economic institutions.
    Keywords: liberal colonialism,economic institutions,allocative efficiency
    JEL: P34 N45 P26
    Date: 2019
  8. By: Mendicino, Caterina; Nikolov, Kalin; Suarez, Javier; Supera, Dominik
    Abstract: How far should capital requirements be raised in order to ensure a strong and resilient banking system without imposing undue costs on the real economy? Capital requirement increases make banks safer and are beneficial in the long run but also entail transition costs because their imposition reduces credit supply and aggregate demand on impact. In the baseline scenario of a quantitative macro-banking model, 25% of the long-run welfare gains are lost due to transitional costs. The strength of monetary policy accommodation and the degree of bank riskiness are key determinants of the trade-off between the short-run costs and long-run benefits from changes in capital requirements. JEL Classification: E3, E44, G01, G21
    Keywords: default risk, effective lower bound, macroprudential policy, transitional dynamics
    Date: 2019–05
  9. By: Ikeda, Daisuke (Bank of Japan)
    Abstract: Asymmetric information is crucial for understanding the disruption of the supply of credit. This paper studies a dynamic economy featuring asymmetric information and resulting adverse selection in credit markets. Entrepreneurs seek loans from banks for projects, but asymmetric information about entrepreneurs' riskiness causes a lemons problem: relatively safe entrepreneurs do not get funded. An increase in the riskiness of some entrepreneurs raises interest rate spreads, aggravates adverse selection, and shrinks the supply of bank credit. The model calibrated to the U.S. economy generates significant business fluctuations including severe recessions comparable to the Great Recession of 2007-09.
    Keywords: Adverse selection; Mechanism design approach; separating contract
    JEL: D82 E32 E44
    Date: 2019–04–01
  10. By: Jablonski, Ryan S.; Oliver, Steven; Hastings, Justin V.
    Abstract: Transnational crime brings substantial foreign capital into a number of fragile and developing states. Yet the economic and political impacts of such capital have rarely been studied due to the challenges of obtaining accurate data on illicit activities. We overcome this challenge by compiling a dataset on the amount and disbursement dates of ransom payments made by ship owners and insurers to Somali pirates from 2005 to 2012, along with sub-national commodity prices and trade flows in Somalia. Using a difference-in-differences strategy, we hypothesize and find that ransoms have effects similar to those associated with the Dutch Disease. These effects include appreciating the local currency, decreasing export competitiveness, and increasing import dependence. The results illuminate a new channel through which illicit capital can undermine long-term economic development and foster an economic and political dependency on illicit sectors.
    JEL: N0 F3 G3
    Date: 2017–06–01
  11. By: Christelle Meniago (Sol Plaatje University, South Africa); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: The study assesses the role of financial development on income inequality in a panel of 48 African countries for the period 1996 to 2014. Financial development is defined in terms of depth (money supply and liquid liabilities), efficiency (from banking and financial system perspectives), activity (at banking and financial system levels) and stability while, three indicators of inequality are used, namely, the: Gini coefficient, Atkinson index and Palma ratio. The empirical evidence is based on Generalised Method of Moments. When financial sector development indicators are used exclusively as strictly exogenous variables in the identification process, it is broadly established that with the exception of financial stability, access to credit (or financial activity) and intermediation efficiency have favourable income redistributive effects. The findings are robust to the: control for unobserved heterogeneity in terms of time effects and inclusion of time invariant variables as strictly exogenous variables in the identification process. The findings are also robust to the Kuznets hypothesis: a humped shaped nexus between increasing GDP per capita and inequality. Policy implications are discussed.
    Keywords: Africa; Finance; Inequality; Poverty
    JEL: D60 E25 G20 I30 O55
    Date: 2018–01
  12. By: Luc Jacolin; Massil Keneck; Alphonse Noah
    Abstract: This paper investigates the impact of mobile financial services - MFS (mobile money, and mobile credit and savings) on the informal sector. Using both parametric and non-parametric methods on panel data from 101 emerging and developing countries over the period 2000-15, we find that MFS negatively affect the size of the informal sector. According to estimates derived from propensity score matching, MFS adoption decreases the informal sector size in a range of 2.4 – 4.3 percentage points of GDP. These formalization effects may stem from different possible transmission channels: improvement in credit access, increase in the productivity/profitability of informal firms attenuating subsistence constraints typical of entrepreneurship in the informal sector, as well as possible induced growth of firms already in the formal sector. The robustness of these results is supported by the use of an alternative estimation approach (instrumental variables). These findings lay the groundwork for the scarce literature on the macroeconomic impact of mobile financial services, a major dimension of the growing drive towards economic digitalization transiting through industry-level MW.
    Keywords: Mobile financial services, Mobile money, Financial innovation, Digitalization, Informal sector, Developing countries.
    JEL: C26 E26 O33 G29 L96
    Date: 2019

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