nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2020‒07‒20
27 papers chosen by
Georg Man

  1. On the causal nature between financial development and economic growth in the Democratic Republic of the Congo: Is it supply leading or demand following? By PINSHI, Christian P.
  2. Redistribution, Inequality, and Efficiency with Credit Constraints By Yoseph Y. Getachew; Stephen J. Turnovsky
  3. Financial Variables as Predictors of Real Growth Vulnerability By Hasenzagl, Thomas; Reichlin, Lucrezia; Ricco, Giovanni
  4. Financial Vulnerability and Risks to Growth in Emerging Markets By Viral V. Acharya; Soumya Bhadury; Jay Surti
  5. Migrants' Remittances and inclusive growth in sub-Saharan Africa By Narcisse Cha'ngom; Georges Tamokwe P.; Edgard Manga
  6. Credit, Income and Inequality By Manthos D. Delis; Fulvia Fringuellotti; Steven Ongena
  7. Misallocation and Capital Market Integration: Evidence From India By Bau, Natalie; Matray, Adrien
  8. Did bank lending stifle innovation in Europe during the Great Recession? By Oana Peia; Davide Romelli
  9. Supporting innovative entrepreneurship: an evaluation of the Italian "Start-up Act" By Francesco Manaresi; Carlo Menon; Pietro Santoleri
  10. The Aggregate Consequences of Default Risk: Evidence from Firm-level Data By Besley, Timothy J.; Roland, Isabelle; Van Reenen, John
  11. Twin Default Crises By Mendicino, Caterina; Nikolov, Kalin; Rubio-Ramírez, Juan Francisco; Suarez, Javier; Supera, Dominik
  12. Discerning Good from Bad Credit Booms; The Role of Construction By Giovanni Dell'Ariccia; Ehsan Ebrahimy; Deniz O Igan; Damien Puy
  13. When Banks Punch Back: Macrofinancial Feedback Loops in Stress Tests By Mario Catalan; Alexander W. Hoffmaister
  14. Hysteresis and Business Cycles By Valerie Cerra; A. Fatas; Sweta Chaman Saxena
  15. The long-run effects of monetary policy By Jordà, Òscar; Singh, Sanjay R.; Taylor, Alan M.
  16. Macroeconomic implications of insolvency regimes By Benjamin Hemingway
  17. Macroprudential Policies, Economic Growth, and Banking Crises By Mohamed Belkhir; Sami Ben Naceur; Bertrand Candelon; Jean-Charles Wijnandts
  18. Effects of Macroprudential Policy: Evidence from Over 6,000 Estimates By Juliana Dutra Araujo; Manasa Patnam; Adina Popescu; Fabian Valencia; Weijia Yao
  19. Drivers of Financial Access: the Role of Macroprudential Policies By Corinne Deléchat; Lama Kiyasseh; Margaux MacDonald; Rui Xu
  20. COVID-19 response needs to broaden financial inclusion to curb the rise in poverty By Mostak Ahamed; Roxana Guti\'errez-Romero
  21. Contesting digital finance for the poor By Ozili, Peterson K
  22. Optimal financial inclusion By Ozili, Peterson K
  23. Finance and Inequality By Martin Cihak; Ratna Sahay
  24. Climate Change and Green Finance in Emerging Market Economies: The Open Economy Dimension By Bortz, Pablo Gabriel; Toftum, Nicole
  25. Why Did Public Banks Lend More During the Global Financial Crisis? By Joshua Bosshardt; Eugenio M Cerutti
  26. Women in Finance: A Case for Closing Gaps By Ratna Sahay; Martin Cihak
  27. Macro-Structural Obstacles to Firm Performance: Evidence from 2,640 Firms in Nigeria By Amr Hosny

  1. By: PINSHI, Christian P.
    Abstract: This paper seeks to study and answer the question on the nature and direction of the causality between financial development and economic growth in the Democratic Republic of the Congo (DRC) using data from 2004 to 2019. The long-term relationship not being robust, we opted for the short-term dynamics with the causality test in the sense of Granger to support this question. The results indicated the existence of a one-way causality from economic growth to financial development. This result is in line with the Demand following hypothesis, given the country’s economic and financial landscape, which presents a less deep financial system. Consequently, choices of growth policies (increase in knowledge, infrastructure, pleasant business climate, structural reforms, etc.) should be adopted to enhance and develop the Congolese financial system. However, we recognize that once growth is restored and becomes sustainable, financial development could lead to sustained and resilient economic growth.
    Keywords: Economic growth, financial development
    JEL: C32 E44 G20 O16 O38 O44
    Date: 2020–07–10
  2. By: Yoseph Y. Getachew; Stephen J. Turnovsky
    Abstract: We develop a model that characterizes the joint determination of income distribution and macroeconomic aggregate dynamics. We identify multiple channels through which alternative public policies such as transfers, consumption and income taxes, and public investment will affect the inequality;efficiency trade off. Some policy changes can affect net income inequality both directly, and indirectly by inducing structural changes in the private-public capital ratio. This in turn influences market inequality and determines the distribution of the next period’s investment and net income. Income tax and transfers have both a direct income effect and an indirect substitution effect, whereas the consumption tax has only the latter. After developing some theoretical propositions summarizing these policy tradeoffs, we present extensive numerical simulations motivated by the South African National Development Plan 2030, the objective of which is to tame soaring inequality and increase per capita GDP. Our numerical simulations illustrate how the judicious combination of these policies may help achieve these targets. The simulations also suggest that the sharp decline in private-public capital ratio coupled with high degree of complementarity between the public and private capitals could be behind the persistence of market inequality in South Africa during the last two decades.
    Keywords: Redistribution policies, Incomplete Capital Market, Idiosyncratic shocks, Efficiency, inequality
    JEL: D31 O41
    Date: 2020–04
  3. By: Hasenzagl, Thomas; Reichlin, Lucrezia; Ricco, Giovanni
    Abstract: We evaluate the role of financial conditions as predictors of macroeconomic risk first in the quantile regression framework of Adrian et al. (2019b), which allows for non-linearities, and then in a novel linear semi-structural model as proposed by Hasenzagl et al. (2018). We distinguish between price variables such as credit spreads and stock variables such as leverage. We find that (i) although the spreads correlate with the left tail of the conditional distribution of GDP growth, they provide limited advanced information on growth vulnerability; (ii) nonfinancial leverage provides a leading signal for the left quantile of the GDP growth distribution in the 2008 recession; (iii) measures of excess leverage conceptually similar to the Basel gap, but cleaned from business cycle dynamics via the lenses of the semi-structural model, point to two peaks of accumulation of risks - the eighties and the first eight years of the new millennium, with an unstable relationship with business cycle chronology.
    Keywords: Business cycle; credit; Downside risk; entropy; financial crises; financial cycle; quantile regressions
    JEL: C32 C53 E32 E44
    Date: 2020–01
  4. By: Viral V. Acharya; Soumya Bhadury; Jay Surti
    Abstract: This paper introduces a new financial vulnerability index for emerging market economies by exploiting key differences in their business cycles relative to those of advanced economies. Information on the domestic price of risk, cost of dollar hedging and market-based measures of bank vulnerability combine to generate indexes significantly more effective in capturing macro-financial vulnerability and stress compared to those based on information in trade and global factors. Our index significantly augments early warning surveillance capacity, as evidenced by out-of-sample forecasting gains around a majority of turning points in GDP growth, relative to distributed lag models that are augmented with information from macro-financial indexes that are custom-built to optimize such forecasts.
    JEL: C53 E32 E44
    Date: 2020–06
  5. By: Narcisse Cha'ngom (CERDI - Centre d'Études et de Recherches sur le Développement International - Clermont Auvergne - UCA - Université Clermont Auvergne - CNRS - Centre National de la Recherche Scientifique); Georges Tamokwe P. (ESSEC - Université de Douala (Ecole supérieure des sciences économiques et commerciales)); Edgard Manga (Université de Douala [Cameroon])
    Abstract: This study assesses the contribution of remittances to the improvement of inclusive growth in sub-Saharan Africa, taking into account the role of institutions. Based on panel data of 24 countries for the period 1985-2014, results show that remittances positively contribute to the inclusiveness of economic growth in sub-Saharan Africa. Controlling for quality of institutions, it came out that poor institutions rather hamper this contribution in the short run with the risk of neutralizing it in the long run.
    Keywords: remittances,inclusive growth,institutions,Sub-Saharan Africa
    Date: 2020–06–12
  6. By: Manthos D. Delis; Fulvia Fringuellotti; Steven Ongena
    Abstract: Analyzing unique data on loan applications by individuals who are majority owners of small firms, we detail how a bank’s credit decisions affect their future income. We use the bank’s cutoff rule, which is based on the applicants’ credit scores, as the discontinuous locus providing exogenous variation in the decision to grant loans. We show that application acceptance increases recipients’ income five years later by more than 10 percent compared to denied applicants. This effect is mostly driven by the use of borrowed funds to undertake investments, and is stronger when individuals are more credit-constrained.
    Keywords: regression discontinuity design; income; credit constraints; business loans; income inequality; economic mobility
    JEL: D31 E24 G21 O15
    Date: 2020–06–01
  7. By: Bau, Natalie; Matray, Adrien
    Abstract: We show that foreign capital liberalization reduces capital misallocation and increases aggregate productivity using a natural experiment. The staggered liberalization of access to foreign capital across disaggregated Indian industries allows us to identify changes in firms' input wedges, overcoming major challenges in the measurement of the effects of changing misallocation. For domestic firms with initially high marginal revenue products of capital (MRPK)/high sales to capital ratios, liberalization increased revenues by 18%, physical capital by 60%, wage bills by 26%, and reduced the marginal revenue product of capital by 43% relative to low MRPK firms. There were no effects on firms with low MRPK. The effects of liberalization are largest in areas with less developed local banking sectors, indicating that foreign investors may substitute for an efficient banking sector. Finally, we develop a method to use natural experiments to estimate the lower bound effect of changes in misallocation on manufacturing productivity. We find that this liberalization episode increased the aggregate productivity of the Indian manufacturing sector by at least 6.5%.
    Keywords: aggregating reduced-form estimates; foreign capital liberalization; India; Misallocation
    JEL: O11 O12 O16 O47
    Date: 2020–01
  8. By: Oana Peia; Davide Romelli
    Abstract: Using the 2008-09 Global Financial crisis and the 2012 Euro area sovereign debt crisis as natural experiments, we investigate the effects of contractions in credit supply on R&D spending in a large sample of European firms. Our identification strategy exploits differences in financial constraints across firms, as well as the cross-industry variation in dependence on external finance, to identify a causal effect of bank credit supply on firm investment in innovation. We show that firms that are more likely financially constrained, in industries more dependent on external finance, have a disproportionally lower growth rate of R&D spending, as well as lower R&D intensity and share of R&D investment in total investment during periods of tight credit supply. These results are robust to different proxies of financial constraints, model specifications and fixed-effects identification strategies.
    Keywords: Financial frictions; Investment; Innovation; R&D spending
    JEL: O30 G21 I22
    Date: 2019–11
  9. By: Francesco Manaresi (Directorate General for Economics, Statistics and Research, Bank of Italy); Carlo Menon (Laterite); Pietro Santoleri (Institute of Economics and EMbeDS, Sant'Anna School of Advanced Studies)
    Abstract: The role of innovative start-ups in contributing to aggregate economic dynamism has attracted increased attention in recent years. While this has translated into several public policies explicitly targeting them, there is little evidence on their e ectiveness. This paper provides a comprehensive evaluation of the "Start-up Act", a policy intervention aimed at supporting innovative start-ups in Italy. We construct a unique database encompassing detailed information on firm balance-sheets, employment, firm demographics, patents and bank-firm relationships for all Italian start-ups. We use conditional difference-in-differences and instrumental variable strategies to evaluate the impact of the "Start-up Act" on firm performance. Results show that the policy induces a significant increase in several firm outcomes whereas no effect is detected in patenting propensity and survival chances. We also document that the policy alleviates nancial frictions characterizing innovative start-ups through the provision of tax credits for equity and a public guarantee scheme which, respectively, trigger an increase in the probability of receiving VC and accessing bank credit.
    Keywords: Start-ups; Entrepreneurship policy; Policy Evaluation; Firm performance
    JEL: M13 L25 L53 D04
    Date: 2020–07
  10. By: Besley, Timothy J.; Roland, Isabelle; Van Reenen, John
    Abstract: This paper studies the implications of perceived default risk for aggregate output and productivity. Using a model of credit contracts with moral hazard, we show that a firm's probability of default is a sufficient statistic for capital allocation. The theoretical framework suggests an aggregate measure of the impact of credit market frictions based on firm-level probabilities of default which can be applied using data on firm-level employment and default risk. We obtain direct estimates of firm-level default probabilities using Standard and Poor's PD Model to capture the expectations that lenders were forming based on their historical information sets. We implement the method on the UK, an economy that was strongly exposed to the global financial crisis and where we can match default probabilities to administrative data on the population of 1.5 million firms per year. As expected, we find a strong correlation between default risk and a firm's future performance. We estimate that credit frictions (i) cause an output loss of around 28% per year on average; (ii) are much larger for firms with under 250 employees and (iii) that losses are overwhelmingly due to a lower overall capital stock rather than a misallocation of credit across firms with heterogeneous productivity. Further, we find that these losses accounted for over half of the productivity fall between 2008 and 2009, and persisted for smaller (although not larger) firms.
    Keywords: Credit frictions; Default Risk; Misallocation; productivity
    JEL: D24 E32 L11 O47
    Date: 2020–01
  11. By: Mendicino, Caterina; Nikolov, Kalin; Rubio-Ramírez, Juan Francisco; Suarez, Javier; Supera, Dominik
    Abstract: We study the interaction between borrowers' and banks' solvency in a quantitative macroeconomic model with financial frictions in which bank assets are a portfolio of defaultable loans. We show that ex-ante imperfect diversification of bank lending generates bank asset returns with limited upside but significant downside risk. The asymmetric distribution of these returns and their implications for the evolution of bank net worth are important for capturing the frequency and severity of twin default crises -simultaneous rises in firm and bank defaults associated with sizeable negative effects on economic activity. As a result, our model implies higher optimal capital requirements than common specifications of bank asset returns, which neglect or underestimate the impact of borrower default on bank solvency.
    Keywords: Bank Fragility; Capital requirements; Default Risk; loan returns; non-diversifiable risk
    JEL: E3 E44 G01 G21
    Date: 2020–02
  12. By: Giovanni Dell'Ariccia; Ehsan Ebrahimy; Deniz O Igan; Damien Puy
    Abstract: Credit booms are a focal point for policymakers and scholars of financial crises. Yet our understanding of how the real sector behaves during booms, and why some booms may go bad, is limited. Despite a large and growing body of literature, most of the work has focused on aggregate economic activity, and relatively little is known about which industries benefit and which suffer during these episodes. This note aims to fill this gap by analyzing disaggregated output and employment data in a large sample of advanced and emerging market economies between 1970 and 2014.
    Keywords: Financial crisis;Bank credit;Credit booms;Employment;Real sector;Financial statistics;Financial crises;Total factor productivity;Credit boom,Value added,Employment,SDN,Value-Added,employment growth,construction sector,credit cycle,Haver
    Date: 2020–02–12
  13. By: Mario Catalan; Alexander W. Hoffmaister
    Abstract: In the presence of adverse macroeconomic shocks, simultaneous capital losses in multiple banks can prompt them to contract their balance sheets. These bank responses generate externalities that propagate in the form of macro-financial feedback loops. This paper develops a credit response and externalities analysis model (CREAM) that integrates a disaggregated banking sector into an otherwise standard macroeconomic structural vector autoregressive model. It shows that accounting for macro-financial feedback loops can significantly affect macroeconomic outcomes and bank-specific stress tests results. The heterogeneity in bank lending responses matters: it determines how each bank fares under adverse conditions and the external effects that banks impose on each other and on economic activity. The model can thus be used to assess the contributions of individual banks to systemic risk along the time dimension.
    Date: 2020–05–29
  14. By: Valerie Cerra; A. Fatas; Sweta Chaman Saxena
    Abstract: Traditionally, economic growth and business cycles have been treated independently. However, the dependence of GDP levels on its history of shocks, what economists refer to as “hysteresis,” argues for unifying the analysis of growth and cycles. In this paper, we review the recent empirical and theoretical literature that motivate this paradigm shift. The renewed interest in hysteresis has been sparked by the persistence of the Global Financial Crisis and fears of a slow recovery from the Covid-19 crisis. The findings of the recent literature have far-reaching conceptual and policy implications. In recessions, monetary and fiscal policies need to be more active to avoid the permanent scars of a downturn. And in good times, running a high-pressure economy could have permanent positive effects.
    Date: 2020–05–29
  15. By: Jordà, Òscar; Singh, Sanjay R.; Taylor, Alan M.
    Abstract: Is the effect of monetary policy on the productive capacity of the economy long lived? Yes, in fact we find such impacts are significant and last for over a decade based on: (1) merged data from two new international historical databases; (2) identification of exogenous monetary policy using the macroeconomic trilemma; and (3) improved econometric methods. Notably, the capital stock and total factor productivity (TFP) exhibit hysteresis, but labor does not. Money is non-neutral for a much longer period of time than is customarily assumed. A New Keynesian model with endogenous TFP growth can reconcile all these empirical observations.
    Keywords: hysteresis; instrumental vari- ables; local projections; monetary policy; money neutrality; trilemma
    JEL: E01 E30 E32 E44 E47 E51 F33 F42 F44
    Date: 2020–01
  16. By: Benjamin Hemingway (Bank of Lithuania & Vilnius University)
    Abstract: The impact of creditor and debtor rights following firm insolvency are studied in a firm dynamics model where defaulting firms choose between restructuring or exit. The model accounts for differing effects of productivity shocks across economies that differ in the credit/debtor rights. Following a negative shock labour productivity falls sharply in a creditor-friendly regime such as the UK while in a debtor-friendly regime such as the US, there is a larger employment response. This paper suggests a possible explanation for the different employment and labour productivity response in the UK and US since the financial crisis.
    Keywords: Bankruptcy, Insolvency, Firm Financing
    JEL: D21 E22 G33
    Date: 2020–06–18
  17. By: Mohamed Belkhir; Sami Ben Naceur; Bertrand Candelon; Jean-Charles Wijnandts
    Abstract: Using a sample that covers more than 100 countries over the 2000-2017 period, we assess the impact of macroprudential policies on financial stability. In particular, we examine whether the activation of macroprudential policies is conducive to a lower incidence of systemic banking crises. Our empirical setup is designed to account for the potential direct and indirect effects that macroprudential policies can have on banking crises. We find that while macro-prudential policies exert a direct stabilizing effect, they also have an indirect destabilizing effect, which works through the depressing of economic growth. A Generalized Impulse Response Function analysis of a dynamic system composed of the probability of a banking crisis and economic growth reveals, however, that macroprudential policies have a positive net effect on financial stability (lower likelihood of systemic banking crises).
    Keywords: Real sector;Financial crises;Macroprudential policies and financial stability;Financial institutions;Financial systems;Macroprudential Policies,Banking crises,Economic Growth,WP,emerge market economy,bank crisis,advanced economy,MPI,basis point
    Date: 2020–05–22
  18. By: Juliana Dutra Araujo; Manasa Patnam; Adina Popescu; Fabian Valencia; Weijia Yao
    Abstract: This paper builds a novel database on the effects of macroprudential policy drawing from 58 empirical studies, comprising over 6,000 results on a wide range of instruments and outcome variables. It encompasses information on statistical significance, standardized magnitudes, and other characteristics of the estimates. Using meta-analysis techniques, the paper estimates average effects to find i) statistically significant effects on credit, but with considerable heterogeneity across instruments; ii) weaker and more imprecise effects on house prices; iii) quantitatively stronger effects in emerging markets and among studies using micro-level data; and iii) statistically significant evidence of leakages and spillovers. Other findings include relatively stronger impacts for tightening than loosening actions and negative effects on economic activity in the near term.
    Keywords: Systemically important financial institutions;Financial crises;Reserve requirements;Domestic credit;Credit demand;Macroprudential Policy,financial stability,Meta-analysis.,WP,outcome variable,average effect,MPM,micro-level,Claessens
    Date: 2020–05–22
  19. By: Corinne Deléchat; Lama Kiyasseh; Margaux MacDonald; Rui Xu
    Abstract: This study analyzes the drivers of the use of formal vs. informal financial services in emerging and developing countries using the 2017 Global FINDEX data. In particular, we investigate whether individuals’ choice of financial services correlates with macro-financial and macro-structural policies and conditions, in addition to individual and country characteristics. We start our analysis on middle and low-income countries, and then zoom in on sub-Saharan Africa, currently the region that most relies on informal financial services, and which has the largest uptake of mobile banking. We find robust evidence of an association between macroprudential policies and individuals’ choice of financial access after controlling for personal and country-level characteristics. In particular, macroprudential policies aimed at controlling credit supply seem to be associated with greater resort to informal financial services compared with formal, bank-based access. This highlights the importance for central bankers and financial sector regulators to consider the potential spillovers of monetary policy and financial stability measures on financial inclusion.
    Date: 2020–05–29
  20. By: Mostak Ahamed; Roxana Guti\'errez-Romero
    Abstract: The ongoing COVID-19 pandemic risks wiping out years of progress made in reducing global poverty. In this paper, we explore to what extent financial inclusion could help mitigate the increase in poverty using cross-country data across 78 low- and lower-middle-income countries. Unlike other recent cross-country studies, we show that financial inclusion is a key driver of poverty reduction in these countries. This effect is not direct, but indirect, by mitigating the detrimental effect that inequality has on poverty. Our findings are consistent across all the different measures of poverty used. Our forecasts suggest that the world's population living on less than $1.90 per day could increase from 8% to 14% by 2021, pushing nearly 400 million people into poverty. However, urgent improvements in financial inclusion could substantially reduce the impact on poverty.
    Date: 2020–06
  21. By: Ozili, Peterson K
    Abstract: This article critically examines digital finance as a pro-poor private sector intervention for international development. It examines the turn from ‘microfinance for the poor’ to ‘digital finance for the poor’. It then considers three key issues, and contest the argument that digital finance is pro-poor. Notably, proponents argue that digital finance can improve development outcomes, but this is based on weak economic logic; secondly, proponents argue that digital finance for the poor is good business - this claim is very weak because evidence suggest that digital finance is good business only with government support. The article further argues that digital finance for the poor will expose the poorest to multiple risks in the financial sector. Therefore, digital finance for the poor should be a contested enterprise.
    Keywords: digital finance, microfinance, financial inclusion, financial development, financial innovation, poor people, financial technology, blockchain, fintech, regtech, sandbox, access to finance, financial services
    JEL: O1 O12 O3 R2
    Date: 2020
  22. By: Ozili, Peterson K
    Abstract: This article reports the conditions for optimality in financial inclusion. The optimal level of financial inclusion is achieved when basic financial services are provided to members of the population at a price that is affordable and that price is also economically sufficient to encourage providers of financial services to provide such financial services on a continual basis. Any level of financial inclusion that does not meet these conditions is sub-optimal. The consequence of sub-optimal levels of financial inclusion are reported and I show that maintaining a sub-optimal level of financial inclusion – which is common in many countries – is incentive-inefficient both for users and suppliers of basic financial services.
    Keywords: financial inclusion, optimal financial inclusion, excluded population, demand-side financial inclusion, supply-side financial inclusion.
    JEL: O12 O17 O50 R2
    Date: 2020
  23. By: Martin Cihak; Ratna Sahay
    Abstract: The study examines empirical relationships between income inequality and three features of finance: depth (financial sector size relative to the economy), inclusion (access to and use of financial services by individuals and firms), and stability (absence of financial distress). Using new data covering a wide range of countries, the analysis finds that the financial sector can play a role in reducing inequality, complementing redistributive fiscal policy. By expanding the provision of financial services to low-income households and small businesses, it can serve as a powerful lever in helping create a more inclusive society but—if not well managed—it can amplify inequalities.
    Keywords: Financial crises;Financial systems;Financial services;Macroprudential policies and financial stability;Financial institutions;SDN,inequality,Sahay,high inequality,financial service,develop economy
    Date: 2020–01–17
  24. By: Bortz, Pablo Gabriel; Toftum, Nicole
    Abstract: The paper reviews the alternatives available to Emerging Market Economies (EMEs) to finance investment required to mitigate and adapt to climate change. It also takes into account the financial needs to achieve the Sustainable Development Goals (SDGs). Since the requirements dwarfs the financial capabilities of the public sector in EMEs, the paper explores possible funding channels focusing on international financial markets. The paper identifies potential obstacles to a smooth and sustainable finance provision, including the influence of the global financial cycle on credit supply, risks related to currency mismatch and creditworthiness assessment, and mispricing of risks. The review also identifies the challenges to the exporting profile and therefore the sustainability of the balance of payments of EMEs. Finally, the paper provides some reflections on the limits of domestic private capital markets to bridge the “environmental financial gap”, and calls for the deeper involvement of specialized and official financial institutions.
    Keywords: Climate Change, Sustainable Development Goals, Financial requirements, international capital markets, green bonds, sustainable finance
    JEL: E44 F64 G23 O13 Q58
    Date: 2020–07–09
  25. By: Joshua Bosshardt; Eugenio M Cerutti
    Abstract: During the Global Financial Crisis (GFC), state-owned or public banks lent relatively more than domestic private banks in many countries. However, data limitations have hindered a thorough assessment of what led public banks to better maintain lending during the GFC. Using a novel bank-level dataset covering 25 emerging market economies, we show that public banks lent relatively more during the GFC because they pursued an objective of helping to stabilize the economy, rather than because they had superior fundamentals or access to public or depositors’ funding. Nonetheless, their countercyclical behavior seems unique to the GFC rather than a regular characteristic of public banks before and after the GFC.
    Date: 2020–06–05
  26. By: Ratna Sahay; Martin Cihak
    Abstract: Women are underrepresented at all levels of the global financial system, from depositors and borrowers to bank board members and regulators. A new study at the IMF finds that greater inclusion of women as users, providers, and regulators of financial services would have benefits beyond addressing gender inequality. Narrowing the gender gap would foster greater stability in the banking system and enhance economic growth. It could also contribute to more effective monetary and fiscal policy. New evidence suggests that greater access for women to and use of accounts for financial transactions, savings, and insurance can have both economic and societal benefits. For example, women merchants who opened a basic bank account tend to invest more in their businesses, while female-headed households often spend more on education after opening a savings account. More inclusive financial systems in turn can magnify the effectiveness of fiscal and monetary policies by broadening financial markets and the tax base. The paper also studies the large gaps between the representation of men and women in leadership positions in banks and in banking-supervision agencies worldwide. It finds that, shockingly, women accounted for less than 2 percent of financial institutions’ chief executive officers and less than 20 percent of executive board members. The analysis suggests that, controlling for relevant bank- and country-specific factors, the presence of women as well as a higher share of women on bank boards appears associated with greater financial resilience. This study also finds that a higher share of women on boards of banking-supervision agencies is associated with greater bank stability. This evidence strengthens the case for closing the gender gaps in leadership positions in finance.
    Keywords: Bank supervision;Banking;Economic growth;Financial stability;Gender equality;Gender;Financial inclusion;Boards of Directors
    Date: 2018–09–17
  27. By: Amr Hosny
    Abstract: A recent World Bank enterprise survey identified access to finance as the top constraint to Doing Business in Nigeria. In this context, the objective of this paper is two-fold: (i) study firm characteristics associated with more access to finance and export diversification; and (ii) quantify the impact of these structural obstacles on firm performance. Results suggest that (i) larger and export-oriented firms are about 40 percentage points less likely to report access to finance as a business obstacle, while firms perceiving access to finance as a constraint are, on average, about 10-40 percentage points less likely to be export-oriented diversified firms; and (ii) better access to finance and export diversification can help firm employment —as much as 80 percent higher— and capacity utilization. Results are largely robust to different specifications and estimation methods.
    Keywords: Export diversification;Economic conditions;Financial crises;Export markets;Export growth;enterprise surveys,access to credit,Nigeria,WP,Logit,firm performance,probit,endogeneity,financial development
    Date: 2020–05–22

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