nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2019‒11‒04
twelve papers chosen by
Georg Man

  1. US banking deregulation and local economic growth: Direct effects and externalities By Pieter IJtsma; Sherrill Shaffer; Laura Spierdijk
  2. Financial Reforms and Industrialisation: Evidence from Nigeria By Oludele E. Folarin
  3. Foreign Direct Investment, Domestic Investment and Green Growth in Nigeria: Any Spillovers? By Akintoye V. Adejumo; Simplice A. Asongu
  4. Remittances, the Diffusion of Information and Industrialisation in Africa By Simplice A. Asongu; Nicholas M. Odhiambo
  5. Governance, Capital flight and Industrialisation in Africa By Simplice A. Asongu; Nicholas M. Odhiambo
  6. Small Firms and Domestic Bank Dependence in Europe's Great Recession By Mathias Hoffmann; Egor Maslov; Bent E. Sørensen
  7. The Mobile Phone, Information Sharing and Financial Sector Development in Africa: A Quantile Regressions Approach By Simplice A. Asongu; Nicholas M. Odhiambo
  8. Funding Economic Development and the Role of National Development Banks-The Case of Cyprus By Helen Kavvadia; Savvakis C. Savvides
  9. FDI and regional development policy By Iammarino, Simona
  10. Capital Flows to Emerging Market and Developing Economies By Belke, Ansgar; Volz, Ulrich
  11. Scaling up climate-compatible infrastructure: Insights from national development banks in Brazil and South Africa By OECD
  12. The Effect of Personalized Feedback on Small Enterprises’ Finances in Uganda By Seitz, Helke; Menkhoff, Lukas; Grohmann, Antonia

  1. By: Pieter IJtsma; Sherrill Shaffer; Laura Spierdijk
    Abstract: This study investigates the effects of banking deregulation on county-level economic growth in the U.S. during the 1970–2000 period. Our main contribution to the literature is that we analyze both the direct and external effects of banking deregulation on local economic growth. For the regions South, West and Northeast, we find significantly positive long-run direct effects of intrastate branching deregulation on the expected growth rates of counties in the deregulated state itself, up to several percentage points. We also establish significantly positive long-run external effects on the expected growth rates of counties adjacent to the deregulated state, up to several tenths of percentage points. We do not find such robust effects for interstate banking deregulation.
    Keywords: U.S. banking deregulation, economic growth, externalities
    JEL: G21 G28
    Date: 2019–10
  2. By: Oludele E. Folarin (University of Ibadan, Ibadan, Nigeria)
    Abstract: Nigeria adopted the Structural Adjustment Programme (SAP) in 1986 after the crash in world oil price in the early 1980s. Financial reforms are part of the reforms implemented during the SAP. Since, industrialisation is seen as an engine of growth, we conduct an empirical assessment of the effects of financial sector reforms on industrialisation in Nigeria using an annual time series data over 1981 - 2015. Using an autoregressive distributed lag (ARDL) model, our findings show that financial reforms have a positive and significant impact on industrialisation.
    Keywords: Financial reforms, Financial repression, Industrialisation, ARDL bounds test
    JEL: C32 E44 O14 O55
    Date: 2019–01
  3. By: Akintoye V. Adejumo (Obafemi Awolowo University, Ile-Ife, Nigeria); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: Globally, investments in physical and human capital have been identified to foster real economic growth and development in any economy. Investments, which could be domestic or foreign, have been established in the literature as either complements or substitutes in varying scenarios. While domestic investments bring about endogenous growth processes, foreign investment, though may be exogenous to growth, has been identified to bring about productivity and ecological spillovers. In view of these competing–conflicting perspectives, this chapter examines the differential impacts of domestic and foreign investments on green growth in Nigeria during the period 1970-2017. The empirical evidence is based on Auto-regressive Distributed Lag (ARDL) and Granger causality estimates. Also, the study articulates the prospects for growth sustainability via domestic or foreign investments in Nigeria. The results show that domestic investment increases CO2 emissions in the short run while foreign investment decreases CO2 emissions in the long run. When the dataset is decomposed into three sub-samples in the light of cycles of investments within the trend analysis, findings of the third sub-sample (i.e. 2001-2017) reveal that both types of investments decrease CO2 emissions in the long run while only domestic investment has a negative effect on CO2 emissions in the short run. This study therefore concludes that as short-run distortions even out in the long-run, FDI and domestic investments has prospects for sustainable development in Nigeria through green growth.
    Keywords: Investments; Productivity; Sustainability; Growth
    JEL: E23 F21 F30 O16 O55
    Date: 2019–01
  4. By: Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: This study examines the role of information and communication technology (ICT) on remittances for industrialisation in a panel of 49 African countries for the period 1980-2014. The empirical evidence is based on three simultaneity-robust estimation techniques, namely: (i) Instrumental Fixed Effects (FE) in order to control for the unobserved heterogeneity; (ii) Generalised Method of Moments (GMM) to account for persistence in industrialisation; and (iii) Instrumental Quantile Regressions (QR) to control for initial levels of industrialisation. Our best estimators are from FE and QR estimations because the GMM regression outputs largely fail post-estimation diagnostic tests. The following findings are established: (i) There are positive marginal effects from the interaction between remittances and ICT in the FE regressions whereas there are negative marginal impacts from the interaction between remittances and ICT; (ii) Interactions between remittances and mobile phone penetration are positive in the bottom and 90th quantiles whereas the interaction between internet penetration and remittances is positive in the bottom and top quantiles of the industrialisation distribution. Overall, the role of ICT in remittances for industrialisation is much more apparent when existing levels of industrialisation are accounted for. The findings contribute to the debates on the importance of external flows and information infrastructure in economic growth as well as the relevance of remittances in driving economic development in environments where institutions are weak. The value of the study to scholars and policy makers also builds on the fact that the potential for ICT and remittances in Africa can be leveraged to address development challenges on the continent such as the low level of industrialisation.
    Keywords: Remittances; Industrialisation; ICT; Africa
    JEL: F24 F43 F63 O30 O55
    Date: 2019–01
  5. By: Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: The study examines the role of governance in modulating the effect of capital flight on industrialisation in Africa. The empirical evidence is based on Generalised Method of Moments and governance is bundled by principal component analysis, namely: (i) political governance from political stability and “voice and accountability”; (ii) economic governance from government effectiveness and regulation quality; and (iii) institutional governance from corruption-control and the rule of law. First, governance increases industrialisation whereas capital flight has the opposite effect; and second, governance does not significantly mitigate the negative effect of capital flight on industrialisation. Policy implications are discussed.
    Keywords: Econometric modelling; Capital flight; Governance; Industrialisation; Africa
    JEL: C50 F34 G38 O14 O55
    Date: 2019–01
  6. By: Mathias Hoffmann; Egor Maslov; Bent E. Sørensen
    Abstract: Small businesses (SMEs) depend on banks for credit. We show that the severity of the Eurozone crisis was worse in countries where firms borrowed more from domestic banks (“domestic bank dependence”) than in countries where firms borrowed more from international banks. Eurozone banking integration in the years 2000–2008 mainly involved cross-border lending between banks while foreign banks’ lending to the real sector stayed flat. Hence, SMEs remained dependent on domestic banks and were vulnerable to global banking shocks. We confirm, using a calibrated quantitative model, that domestic bank dependence makes sectors and countries with many SMEs vulnerable to global banking shocks.
    Keywords: small and medium enterprises, SME access to finance, banking integration, domestic bank dependence, international transmission, Eurozone crisis
    JEL: F30 F36 F40 F45
    Date: 2019
  7. By: Simplice A. Asongu (Yaoundé/Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    Abstract: This study investigates linkages between the mobile phone, information sharing offices (ISO) and financial sector development in 53 African countries for the period 2004-2011. ISO are private credit bureaus and public credit registries. The empirical evidence is based on contemporary and non-contemporary quantile regressions. Two main hypotheses are tested: mobile phones complement ISO to enhance the formal financial sector (Hypothesis 1) and mobile phones complement ISO to reduce the informal financial sector (Hypothesis 2). The hypotheses are largely confirmed. This research adds to the existing body of literature by engaging hitherto unexplored dimensions of financial sector development and investigating the role of mobile phones in information sharing for financial sector development.
    Keywords: Information sharing; Banking sector development; Africa
    JEL: G20 G29 L96 O40 O55
    Date: 2019–01
  8. By: Helen Kavvadia (Visiting Research Associate, Identités. Politiques, Sociétés, Espaces (IPSE), University of Luxembourg, Luxembourg); Savvakis C. Savvides (Visiting Lecturer, John Deutsch Institute for the Study of Economic Policy, Queen’s University, Canada)
    Abstract: The paper draws on previous research on the role of Multilateral Development Banks (MDBs), Regional Development Banks (RDBs) and National Development Banks (NDBs). It examines the role of the Cyprus Development Bank (CDB), prior its privatisation in 2008, in the economic development of the country and, specifically, its intermediation of international finance from multilateral and regional development banks. Currently, this function is undertaken by the commercial banks, which are however limited by a balance sheet fatigue, resulting from the excessive levels of private debt, as shown in this paper. Moreover, the commercial banks lack necessary elements in successfully executing this key role. They do not have the professional competence as well as the discipline and culture for executing such a highly demanding role in the economy. Last but not least, and judging from the experience of the CDB it is imperative to have a totally independent and competent financing institution, which will lead by example. Further to the analysis of the current macroeconomic and institutional context in Cyprus, there is a void of institutional capacity to fund projects and offer valuable advice to state and private decision-making bodies on decisive development projects. This paper recommends the establishment of an NDB or a National Development Finance Agency (NDFA), and proposes an appropriate model.
    Keywords: National Development Banks, International Finance, Regional Development Banks, Multilateral Development Banks
    JEL: F45
    Date: 2019–09
  9. By: Iammarino, Simona
    Abstract: The transformations in the worldwide division of labour brought about by globalisation and technological change have shown an unintended negative effect, particularly evident in advanced economic systems: uneven spatial distribution of wealth and rising within-country inequality. Although the latter has featured prominently in recent academic and policy debates, in this paper we argue that the relevance of connectivity (here proxied by foreign capital investments, FDI) for regional economic development is still underestimated and suffers from a nation-biased perspective. As a consequence, the relationship between the spatial inequality spurred by the global division of labour and the changes in the structural advantages of regions remains to be fully understood in its implications for economic growth, territorial resilience and industrial policy. Furthermore, even though connectivity entails bi-directional links – i.e. with regions being simultaneously receivers and senders – attractiveness to foreign capital has long been at the centre of policy attention whilst internationalisation through investment abroad has been disregarded, and sometimes purposely ignored, in regional development policy agendas. We use three broad-brushed European case-studies to discuss some guiding principles for a place-sensitive regional policy eager to integrate the connectivity dimension in pursuing local economic development and territorial equity.
    Keywords: FDI; multinational enterprises; regions; connectivity; regional development policy
    JEL: F21 F23 O1 O52 R11 R58
    Date: 2018–10–29
  10. By: Belke, Ansgar; Volz, Ulrich
    JEL: E32 E44 E58 E65
    Date: 2019
  11. By: OECD
    Abstract: National development banks (NDBs) and development finance institutions – domestically focused, publicly owned financial institutions with a specific development mandate – are poised to play a role in bridging the investment gap for climate-compatible infrastructure in developing countries. But delivering on the Paris Agreement will require NDBs to transition from their traditional role as ‘financer’ to ‘mobiliser’ of investment for infrastructure, and to be better recognised in the international climate and development finance landscape. This paper highlights the role of NDBs drawing from case studies of the Brazilian Banco Nacional de Desenvolvimento Econômico e Social and the Development Bank of Southern Africa. As such, it provides important impetus to the international discourse on decisive climate action.
    Date: 2019–10–30
  12. By: Seitz, Helke; Menkhoff, Lukas; Grohmann, Antonia
    JEL: O12 D22 O16 L26
    Date: 2019

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