nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2020‒05‒18
ten papers chosen by
Georg Man

  1. Rural financial intermediation and poverty reduction in Ghana: A micro-level analysis By Michael Danquah; Abdul Malik Iddrisu; Williams Ohemeng; Alfred Barimah
  2. Lead-lag relationship between macroeconomic variables and stock market: evidence from Korea By Aziz, Abdul; Masih, Mansur
  3. Credit Markets, Relationship Banking, and Firm Entry By Qingqing Cao; Paolo Giordani; Raoul Minetti; Pierluigi Murro
  4. Discussion of Financial Integration at the Global Market Era By Tursoy, Turgut; Berk, Niyazi
  5. Land Collateral and Rule-of-Thumb Households in a Franc Zone Country: A Bayesian Appraisal By NANA DAVIES, Charles
  6. Modelling Small Open Developing Economies in a Financialized World: A Stock-Flow Consistent Prototype Growth Model By Antoine GODIN; Sakir-Devrim YILMAZ
  7. Ghana: What Economic Challenges? By Selin ÖZYURT
  8. Small and medium-scale enterprises in Nigeria: their characteristics, problems and sources of finance By David B. Ekpenyong.; M.O. Nyong
  9. The Global Impact of COVID-19 on Fintech Adoption By Jonathan Fu; Mrinal Mishra
  10. On the instability of banking and other financial intermediation By Chao Gu; Cyril Monnet; Ed Nosal; Randall Wright

  1. By: Michael Danquah; Abdul Malik Iddrisu; Williams Ohemeng; Alfred Barimah
    Abstract: The financial sector in rural areas, where most of the poor people in sub-Saharan Africa are found, has transformed massively in recent times, notably through the increased penetration of several types of rural financial intermediaries in addition to rural and community banks and microfinance institutions. Using recent household survey data, we ascertain the access of rural populations to various types of financial services, and the influence of rural financial intermediation on poverty reduction, in Ghana.
    Keywords: rural financial intermediation, Poverty reduction, Welfare, Financial inclusion, Ghana
    Date: 2020
  2. By: Aziz, Abdul; Masih, Mansur
    Abstract: This study attempts to investigate whether share price index, specifically KOSPI of Korean Exchange, can be considered as a mirror or reflection of economic activities in Korea. The purpose is to make a finer point with respect to the relationship between economic growth and stock market especially in terms of stock prices. The present study proceeds with a single point investigative agenda as to what is the relationship between the health of the real economy and the health of the stock market? Does a rally in share prices reflect better health of the economy or it is the pink economic health that causes share prices to change? We have examined the causal relationships between the share price index and other crucial macroeconomic variables namely money supply, exchange rate, consumer price index, and money market rate for the reason of right and robust model specification. The standard time series techniques have been employed. The present study reports causality running from economic growth to share price index and not the other way round. It may therefore be stated that the stock markets in Korea are demand driven and industry led which means that demand for greater equity finance is led by higher and improved economic performance. That is, the state of the economy has a bearing on the share prices but the health of the stock market in the sense of a rising share price index is not reflective of an improvement in the health of the economy. In other words, a Bull Run or rising prices in the stock market cannot be taken to be a leading indicator of the revival of the economy in Korea.
    Keywords: Lead-lag relationship, stock markets, macroeconomic variables, time series techniques, Korea
    JEL: C22 C58 E44
    Date: 2018–10–18
  3. By: Qingqing Cao (Michigan State University); Paolo Giordani (LUISS University); Raoul Minetti (Michigan State University); Pierluigi Murro (LUISS University)
    Abstract: Credit frequently flows to the business sector through information-intensive bank-firm relationships. This paper studies the impact of relationship banking on firm entry. Exploiting Italian data, we document that relationship-oriented local credit markets feature lower entry, larger size at entry, and relatively more spin-offs than de novo entrepreneurs' entries. Information spillovers from credit relationships to entrants contribute to these effects. A dynamic general equilibrium model calibrated to the Italian data can match these effects when information spillovers are allowed for. Relationship banks' information on incumbents is transferable to incumbents' spin-offs but crowds out information acquisition on de novo entrants. The buildup of incumbents' business wealth during credit relationships can outweigh the aggregate output effect of reduced entry.
    Keywords: Credit Relationships, Firm Entry, Information Spillovers, Spin-offs
    JEL: E44 G21 O16
    Date: 2020–05
  4. By: Tursoy, Turgut; Berk, Niyazi
    Abstract: This paper purpose is to discuss the latest troubling episode and remind the most critical event again at the world is the integration. First, the last attempt by the countries had been discussing and pronoun that the free market and its extensions are the most prominent phenomena around the world that market participants’ perceptions are determined the equilibria prices freely. All the development into the markets witnesses that free market dynamics and the creation of the single global market is the most dominant factor to create a tremendous stimulus behind economic growth. This paper consequently supporting the view that financial integration is providing the necessary conditions to risk-sharing and capital flows to stimulus the economic growth with the expected level at global.
    Keywords: Financial Integration
    JEL: F1 F11 F15 G1 G15
    Date: 2020–05–05
  5. By: NANA DAVIES, Charles
    Abstract: We model the supply side of the banking sector, two types of households, and a land asset collateral in a small open economy model that accounts for some of the most enduring features and provisions of the Franc Zone. The model is estimated using the Metropolis-Hasting algorithm and Cameroon's annual data from 1979 to 2016. Four findings stand out. First, sensible posteriors of some deep parameters are obtained when the proportion of rule-of-thumb households is set to forty-eight percent. Second, permanent technology, bank profit, consumption, and foreign inflation shocks are the main drivers of macroeconomic fluctuations. Third, among those shocks, only a bank profit shock, which is associated with a sharp drop of wholesale interest rates, leads to an output expansion. Fourth, fiscal policy matters but through its effects on banks' balance sheet.
    Keywords: Cameroon - Franc Zone - Land Collateral - Metropolis-Hasting - Rule-of-Thumb households
    JEL: C68 E32 F41 F45
    Date: 2020–04–23
  6. By: Antoine GODIN; Sakir-Devrim YILMAZ
    Abstract: This paper builds a stock-flow consistent growth model in continuous time in order to analyze the effects of policy rates in financial centres on a small open developing economy with an open capital account and a flexible exchange rate. Using a balance-sheet approach and explicitly modelling real-financial spheres interactions and propagation mechanisms, we show that a fall in global policy rates triggers appreciation-induced boom-bust episodes in the small open economy, driven by portfolio flows and cross-border lending. During the boom, public balances improve, unemployment and inflation fall and current account deficit widens. Our results show that the boom is larger if foreign exchange market adjustment is sluggish, expectations adjust more rapidly, banking sector is monopolistic or risk perception is less sensitive to fundamentals. In the absence of productivity growth differentials between the developing economy and the rest of the world, the balance-of payments constrained growth rate is a strong attractor and the economy gravitates towards this growth rate as financial variables and exchange rates adjust to their new levels.
    JEL: Q
    Date: 2020–02–20
  7. By: Selin ÖZYURT
    Abstract: Ghana stands apart from other African economies thanks to its consolidated democratic achievements as well as the pace of its economic growth since the early 2000s. The start of oil production in the second decade of the 21st century has significantly transformed the nation’s economic landscape, resulting in faster growth, but also exposing the country to variations in crude oil prices.
    Keywords: Ghana
    JEL: E
    Date: 2019–06–26
  8. By: David B. Ekpenyong.; M.O. Nyong (University of Ibadan)
  9. By: Jonathan Fu (Center for Sustainable Finance and Private Wealth; University of Zurich - Department of Banking and Finance); Mrinal Mishra (Swiss Finance Institute; University of Zurich - Department of Banking and Finance)
    Abstract: We draw on mobile application data from 74 countries to document the effects of the COVID-19 pandemic on the adoption of digital finance and fintech. We estimate that the spread of COVID-19 and related government lockdowns have led to between a 24 and 32 percent increase in the relative rate of daily downloads of finance mobile applications in the sample countries. In absolute terms, this equates to an average daily increase of roughly 5.2 to 6.3 million application downloads and an aggregate increase of about 316 million app downloads since the pandemic’s outbreak to the present, taking into account prior trends. Most regions across the world exhibit notable increases in absolute, relative, and per capita terms. Preliminary analysis of country-level characteristics suggest that market size and demographics, rather than level of economic development and ex-ante adoption rates, drive differential trends.
    Keywords: digital finance, fintech, financial inclusion, technological adoption, COVID-19, cross-country
    JEL: G23 G20
    Date: 2020–05
  10. By: Chao Gu; Cyril Monnet; Ed Nosal; Randall Wright
    Abstract: Are financial intermediaries inherently unstable and, if so, why? To address this, we analyse whether model economies with financial intermediation are particularly prone to multiple, cyclic or stochastic equilibria. Several formalisations are considered: a dynamic version of Diamond-Dybvig banking incorporating reputational considerations; a model with fixed costs and delegated investment as in Diamond; one with bank liabilities serving as payment instruments similar to currency in Lagos-Wright; and one with intermediaries as dealers in decentralised asset markets, similar to Duffie et al. Although the economics and mathematics differ across specifications, in each case financial intermediation engenders instability in a precise sense.
    Keywords: banking, financial intermediation, instability, volatility
    JEL: D02 E02 E44 G21
    Date: 2020–05

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