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

  1. Integration between Economic Growth and Financial Development in India: An Analysis By A., Rjumohan
  2. Stock Markets: An Overview and A Literature Review By A., Rjumohan
  3. Macroeconomic Policy, Product Market Competition, and Growth: The Intangible Investment Channel By JaeBin Ahn; Romain A Duval; Can Sever
  4. Does Going Tough on Banks Make the Going Get Tough? Bank Liquidity Regulations, Capital Requirements, and Sectoral Activity By Deniz O Igan; Ali Mirzaei
  5. What is the tipping point? Low rates and financial stability By Porcellacchia, Davide
  6. Do Rural Banks Matter That Much? Burgess and Pande (AER, 2005) Reconsidered By Nino Buliskeria; Jaromir Baxa
  7. Banking for the Public Good: Access to Credit and the Nonprofit Sector By G. Nathan Dong
  8. The cleansing effect of banking crises By Gropp, Reint; Ongena, Steven; Rocholl, Jörg; Saadi, Vahid
  9. The role of demographics and migration for the future of economic growth in China By Juan Carlos Conesa; Yan Wang
  10. Productivity Growth and Value Chains in Four European Countries By Izabela Karpowicz; Nujin Suphaphiphat
  11. The Micro and Macro Dynamics of Capital Flows By Felipe Saffie; Liliana Varela; Kei-Mu Yi
  12. Effects of Monetary Policy in a Model with Cash-in-Advance Constraints on R&D and Capital Accumulation By Daiki Maeda; Yuki Saito
  13. Reallocation effects of monetary policy By Daisuke Miyakawa; Koki Oikawa; Kozo Ueda
  14. Monetary Policy Transmission in Emerging Markets and Developing Economies By Luis Brandao-Marques; R. G Gelos; Thomas Harjes; Ratna Sahay; Yi Xue
  15. On the origins of financial development: Ancestral population diversity and financial risk-taking By Manthos D. Delis; Evangelos Dioikitopoulos; Steven Ongena
  16. Production and financial networks in interplay: Crisis evidence from supplier-customer and credit registers By Kenan Huremovic; Jiménez Gabriel; Enrique Moral-Benito; José-Luis Peydró; Fernando Vega-Redondo
  17. The Dynamics of Non-Performing Loans during Banking Crises: A New Database By Anil Ari; Sophia Chen; Lev Ratnovski
  18. The Impact of Conflict and Political Instability on Banking Crises in Developing Countries By Ali Compaoré; Montfort Mlachila; Rasmané Ouedraogo; Sandrine Sourouema
  19. The Promise of Fintech; Financial Inclusion in the Post COVID-19 Era By Ratna Sahay; Ulric Eriksson von Allmen; Amina Lahreche; Purva Khera; Sumiko Ogawa; Majid Bazarbash; Kimberly Beaton
  20. The Matthew effect and modern finance: on the nexus between wealth inequality, financial development and financial technology By Jon Frost; Leonardo Gambacorta; Romina Gambacorta
  21. Taking Down the Wall: Transition and Inequality By Serhan Cevik; Carolina Correa-Caro
  22. The impact of COVID-19 Pandemic on the Inflow of Remittances: Perspective of Bangladesh By Das, Bijoy Chandra; Sutradhar, Soma Rani
  23. Do Remittances Enhance Financial Inclusion in LMICs and in Fragile States? By Sami Ben Naceur; Ralph Chami; Mohamed Trabelsi
  24. Unlocking Access to Finance for SMEs: A Cross-Country Analysis By Armand Fouejieu; Anta Ndoye; Tetyana Sydorenko
  25. The changing structure of financial intermediation in Asia: Benefits and risks By Caroline Roulet

  1. By: A., Rjumohan
    Abstract: About 50 years back, Raymond Goldsmith sought to document the relationship between financial and economic development. Since then, the enquiry has witnessed promising progress with a growing literature highlighting a strong positive link between the financial system and economic growth. The present study is a modest attempt at an empirical substantiation of the relationship between economic growth and financial development in the context of India. Evidently, the analysis is based on time series data on economic growth and indicators of financial development pertaining to India. Hence the first section of this study discusses the time series econometric methods that are utilized in the analysis of this study. The second section seeks to analyze the objective of this study, viz., assessing whether there exists a long-run equilibrium between economic growth and financial development in India. Using the conventional Johansen-Juselius cointegration test and the modern ARDL-based bounds test as well as the conventional Granger-causality tests, we show that there does exist a long-run relationship between the economic and financial variables in the face of the external sector indicators.
    Keywords: Stock market, Economic growth, Integration, India, Econometric analysis.
    JEL: G1 G2 O1 O16
    Date: 2019–04
  2. By: A., Rjumohan
    Abstract: Stock markets are without any doubt, an integral and indispensable part of a country’s economy. But the impact of stock markets on the country’s economy can be different from how the other countries’ stock markets affect their economies. This is because the impact of stock markets on the economy depends on various factors like the organization of stock exchanges, its relationship with other components of the financial system, the system of governance in the country etc. All of these factors are distinct for each country; therefore, the impact of stock markets on a country’s economy is also distinct. Over the years, the Indian capital market system has undergone major fundamental institutional changes which resulted in reduction in transaction costs, significant improvements in efficiency, transparency and safety. All these changes have brought about the economic development of the economy through stock markets. In the same way, economic expansion fuelled by technological changes, products and services innovation is expected to create a high demand for stock market development. The present paper is divided into two parts: in the first section, the evolution of international stock markets and the developments in Indian stock markets are briefly reviewed to help us understand how stock markets have emerged as the driving economic forces that they are today; and the second part presents a number of studies that review the impact of financial development, stock market development and its functions and its possible impact on economic growth.
    Keywords: Stock market, Economic growth, Development, Finance, Indian economy
    JEL: G1 G2 O16
    Date: 2019–04
  3. By: JaeBin Ahn; Romain A Duval; Can Sever
    Abstract: While there is growing evidence of persistent or even permanent output losses from financial crises, the causes remain unclear. One candidate is intangible capital – a rising driver of economic growth that, being non-pledgeable as collateral, is vulnerable to financial frictions. By sheltering intangible investment from financial shocks, counter-cyclical macroeconomic policy could strengthen longer-term growth, particularly so where strong product market competition prevents firms from self-financing their investments through rents. Using a rich cross-country firm-level dataset and exploiting heterogeneity in firm-level exposure to the sharp and unforeseen tightening of credit conditions around September 2008, we find strong support for these theoretical predictions. The quantitative implications are large, highlighting a powerful stabilizing role for macroeconomic policy through the intangible investment channel, and its complementarity with pro-competition product market deregulation.
    Keywords: Financial crises;Supply and demand;Economic theory;Economic growth;Economic policy;Financial frictions,Intangible investment,Competition,Product Market,Monetary policy,Growth,Hysteresis,WP,pre-crisis,counter-cyclical,post-crisis,Aghion,macroeconomic policy
    Date: 2020–02–07
  4. By: Deniz O Igan; Ali Mirzaei
    Abstract: Whether and to what extent tougher bank regulation weighs on economic growth is an open empirical question. Using data from 28 manufacturing industries in 50 countries, we explore the extent to which cross-country differences in bank liquidity and capital levels were related to differences in sectoral activity around the period of the global financial crisis. We find that industries which are more dependent on external finance, in countries where banks had higher liquidity and capital ratios, performed relatively better during the crisis, with regard to investment rates and the creation of new enterprises. This relationship, however, exists only for bank-based systems and emerging market economies. In the pre-crisis period, we find only a marginal link to bank capital. These findings survive a battery of robustness checks and provide some solid support for the tighter prudential measures introduced under Basel III.
    Date: 2020–06–19
  5. By: Porcellacchia, Davide
    Abstract: To study the effect on financial stability of persistent changes in the interest rate, this paper develops a recursive model of liquidity creation based on Diamond and Dybvig (1983). The model features two stable balanced growth paths: a good one with a healthy banking system and a bad one with a failed banking system. The paper’s main result is that a critical interest-rate level exists, below which a financial crisis takes place and the economy transitions from the good to the bad BGP. At this tipping point for the economy, banks’ franchise value of deposits goes down, since their net interest margins are compressed. This leads to a fall in bank equity, which gives depositors an incentive to run. The tipping point is not necessarily negative or zero. It is an increasing function of the persistence of the change in the interest rate. Since a persistent fall in the interest rate compresses the net interest margin further in the future, it damages the franchise value of deposits more for any given interest-rate cut. JEL Classification: E43, E50, G21
    Keywords: franchise value of deposits, liquidity, lower bound
    Date: 2020–07
  6. By: Nino Buliskeria (Institute of Economic Studies, Faculty of Social Sciences, Charles University Opletalova 26, 110 00, Prague, Czech Republic); Jaromir Baxa (Institute of Economic Studies, Faculty of Social Sciences, Charles University Opletalova 26, 110 00, Prague, Czech Republic; bThe Czech Academy of Sciences, Institute of Information Theory and Automation, Pod Vodarenskou Vezi 4, 182 00, Prague, Czech Republic)
    Abstract: We replicate Burgess and Pande (2005), who analyze the effects of the state-led expansion of the banking sector on poverty in India from 1961 to 1990. They find that the bank branch expansion in the rural areas decreased poverty due to improved access to credit and saving facilities. However, Burgess and Pande (2005) do not consider other simultaneous policies affecting the financial sector and poverty, in particular, the Integrated Rural Development Program aiming at credit subsidizing for the poor. Therefore, using the methodology by Burgess and Pande (2005), we show that structural shifts in the rural bank branch expansion and rural poverty can be identified for almost any other year between 1970 and 1984. Our results imply that the experiment by Burgess and Pande (2005) does not prove a superior impact of the bank branch expansion on poverty reduction in India.
    Keywords: Bank expansion, rural poverty, finance
    JEL: G21 G28 O15 O16
    Date: 2020–05
  7. By: G. Nathan Dong (Boston College)
    Abstract: Does local access to bank finance matter for social institutions providing public goods, such as college education and medical services, to the public? Bank loans is a valuable tool for strengthening nonprofit organizations’ financial stability and more importantly it enhances commitment to the mission by funding startup costs for social service programs. In this paper, we investigate the real effect of banking on the economic and social contribution of the nonprofit sector through the lens of relationship banking and market competition theory. We use the number of bank branches and the Herfindahl index of branch-level deposits in the 15-mile radius surrounding each nonprofit organization to measure the availability and competitiveness of local banking markets. We find that access to banking services is positively associated with the amount of social services provided by nonprofit organizations. The density of bank branches reduces obstacles to obtaining finance: the organization’s borrowing costs are lower in neighborhoods with more bank branches, and nonprofit performance is linked to a lower cost of borrowing.
    Keywords: access to banking, nonprofit organization, corporate social responsibility
    JEL: G21 G28 L31
    Date: 2020–05–13
  8. By: Gropp, Reint; Ongena, Steven; Rocholl, Jörg; Saadi, Vahid
    Abstract: We assess the cleansing effects of the recent banking crisis. In U.S. regions with higher levels of supervisory forbearance on distressed banks during the crisis, there is less restructuring in the real sector and the banking sector remains less healthy for several years after the crisis. Regions with less supervisory forbearance experience higher productivity growth after the crisis with more firm entries, job creation, and employment, wages, patents, and output growth. Supervisory forbearance is greater for state-chartered banks and in regions with weaker banking competition and more independent banks, while recapitalisation of distressed banks through TARP does not facilitate cleansing.
    Keywords: cleansing effect,banking crises,supervisory for bearance,productivity growth
    JEL: G01 G21 G28 O43
    Date: 2020
  9. By: Juan Carlos Conesa; Yan Wang
    Abstract: China's real GDP has been growing by almost 10 percent a year for the last three decades. For how long should we expect this spectacularly high growth to continue? We evaluate in a quantitative two sector model with segmented labor markets and nancial frictions the prospects for China's future growth under different policy scenarios. In our model the high growth rate observed in China since the early 1990s is fueled by the large increase in urban labor supply, because of rural-urban migration, and the emergence of private enterprises that absorb those migrant workers. Our simulations suggest that the rapid aging of its population will signicantly decelerate urban labor force and economic growth starting around 2040. In a counterfactual exercise we show that substantial relaxation of labor market segmentation and nancial constraints faced by private enterprises cannot compensate for that deceleration.
    Date: 2020
  10. By: Izabela Karpowicz; Nujin Suphaphiphat
    Abstract: Advanced economies have been witnessing a pronounced slowdown of productivity growth since the global financial crisis that is accompanied in recent years by a withdrawal from trade integration processes. We study the determinants of productivity slowdown over the past two decades in four closely integrated European countries, Austria, Denmark, Germany and the Netherlands, based on firm-level data. Participation in global value chains appears to have affected productivity positively, including through its effect on TFP when facilitated by higher investment in intangible assets, a proxy for firm innovation. Other contributors to productivity growth in firms are workforce aging, access to finance, and skills mismatches.
    Keywords: Total factor productivity;Real sector;Gross domestic product;Labor productivity;Financial crises;Productivity,firms,GVC,WP,TFP,productivity growth,selected country,advanced economy,intermediate input
    Date: 2020–01–31
  11. By: Felipe Saffie; Liliana Varela; Kei-Mu Yi
    Abstract: We empirically and theoretically study the effects of capital flows on resource allocation within sectors and cross-sectors. Novel data on service firms – in addition to manufacturing firms – allows us to assess two channels of resource reallocation. Capital inflows lower the relative price of capital, which promotes capital-intensive industries – an input-cost channel. Second, capital inflows increase aggregate consumption, which tilts the demand towards goods with high income elasticities – a consumption channel. We provide evidence for these two channels using firm-level census data from the financial liberalization in Hungary, a policy reform that led to capital inflows. We show that firms in capital intensive industries expand, as do firms in industries producing goods with high income elasticities. In the short-term, the consumption channel dominates and resources reallocate towards high income elasticity activities, such as services. We build a dynamic, multi-sector, heterogeneous firm model with multiple sectors of an economy transitioning to its steady-state. We simulate a capital account liberalization and show that the model can rationalize our empirical findings. We then use the model to assess the permanent effects of capital flows and show that the long-term allocation of resources and, thus, aggregate productivity depend on degree of long-term financial openness of the economy. Larger liberalizations trigger long-run debt pushing the country to a permanent trade surplus. This tilts long-run production towards manufacturing exporters, which also increases aggregate productivity.
    JEL: F15 F41 F43 F63
    Date: 2020–06
  12. By: Daiki Maeda; Yuki Saito
    Abstract: To examine the effect of monetary policy on economic growth, we formulate an endogenous growth model with cash-in-advance constraints on R&D and capital accumulation as endogenous growth engines. Within this framework, we show that the relationship between economic growth and the nominal interest rate can be an inverted-U shape. Moreover, we demonstrate that the welfare-maximizing level of the nominal interest rate is larger than the growth-rate-maximizing level of the nominal interest rate.
    Date: 2020–02
  13. By: Daisuke Miyakawa; Koki Oikawa; Kozo Ueda
    Abstract: Responding to the increased attention on the distributional aspects of monetary policy, we investigate the reallocation among heterogeneous firms triggered by nominal growth. Japanese firm-level data show that large firms invest more in R&D and grow faster than small firms under higher inflation. We then construct a model that introduces nominal rigidity into R&D-driven endogenous growth with heterogeneous firms. The model shows that high nominal growth leads to an increase in the market share of innovative firms because menu-cost burdens are relatively heavier for less innovative firms. This reallocation effect yields a positive effect of monetary expansion on both real growth and welfare. The optimal nominal growth can be strictly positive even under nominal rigidity. Moreover, the presence of menu costs can improve welfare.
    Keywords: Reallocation, firm dynamics, creative destruction, menu cost, optimal inflation rate
    JEL: E5 O3 O4
    Date: 2020–06
  14. By: Luis Brandao-Marques; R. G Gelos; Thomas Harjes; Ratna Sahay; Yi Xue
    Abstract: Central banks in emerging and developing economies (EMDEs) have been modernizing their monetary policy frameworks, often moving toward inflation targeting (IT). However, questions regarding the strength of monetary policy transmission from interest rates to inflation and output have often stalled progress. We conduct a novel empirical analysis using Jordà’s (2005) approach for 40 EMDEs to shed a light on monetary transmission in these countries. We find that interest rate hikes reduce output growth and inflation, once we explicitly account for the behavior of the exchange rate. Having a modern monetary policy framework—adopting IT and independent and transparent central banks—matters more for monetary transmission than financial development.
    Keywords: Financial and Monetary Sector;Central bank independence;Nominal effective exchange rate;Monetary policy instruments;Exchange rate policy;Monetary Policy,Emerging markets,Exchange rate channel,Inflation targeting,Financial structure,WP,financial development,monetary policy framework,policy framework,Taylor rule,projection method
    Date: 2020–02–21
  15. By: Manthos D. Delis (Montpellier Business School); Evangelos Dioikitopoulos (King's College London); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR))
    Abstract: We show that risk-taking originates in preindustrial ancestral population diversity. We use data on immigrants residing in the United States and show that controlling for all known determinants of portfolio decisions, diversity positively affects stock market participation and asset allocation but not the ownership of bonds or savings accounts. The diversity effect relates to the level of individualism and knowledge in the origin country. Nevertheless, diversity is significant in the presence of more than 100 control variables or when instrumenting diversity with plant variety. Overall, deep-rooted factors unrelated to contemporary social and economic conditions affect risk-taking.
    Keywords: Stock market participation; Equity share; SIPP; Immigrants; Individualism; Scientific knowledge
    JEL: O16 Z13
    Date: 2020–07
  16. By: Kenan Huremovic; Jiménez Gabriel; Enrique Moral-Benito; José-Luis Peydró; Fernando Vega-Redondo
    Abstract: We show that bank shocks originating in the financial sector propagate upstream and downstream along the production network and triple the impact of direct bank shocks. Our identification relies on the universe of both supplier-customer transactions and bank loans in Spain, a standard operationalization of credit-supply shocks during the 2008-09 global crisis, and the proposed theoretical framework. The impact on real effects is strong, and similarly so, when considering: (i) direct bank shocks to firms versus first-order interfirm contagion; (ii) first-order versus higher-order network effects; (iii) downstream versus upstream propagation; (iv) firm-specific versus economy-wide shocks. Market concentration amplifies these effects.
    Keywords: networks; supply chains; shock propagation; credit supply; real effects of finance
    JEL: D85 E44 E51 G01 G21
    Date: 2020–07
  17. By: Anil Ari (IMF); Sophia Chen (IMF); Lev Ratnovski (ECB)
    Abstract: This paper presents a new dataset on the dynamics of non-performing loans (NPLs) during 88 banking crises since 1990. The data show similarities across crises during NPL build-ups but less so during NPL resolutions. We find a close relationship between NPL problems—elevated and unresolved NPLs—and the severity of post-crisis recessions. A machine learning approach identifies a set of pre-crisis predictors of NPL problems related to weak macroeconomic, institutional, corporate, and banking sector conditions. Our findings suggest that reducing pre-crisis vulnerabilities and promptly addressing NPL problems during a crisis are important for post-crisis output recovery.
    Keywords: non-performing loans, debt, banking crises, recessions, crisis resolution
    JEL: E32 E44 G21 N10 N20
    Date: 2020–05–06
  18. By: Ali Compaoré; Montfort Mlachila; Rasmané Ouedraogo; Sandrine Sourouema
    Abstract: While there is an extensive literature examining the economic impact of conflict and political instability, surprisingly there have been few studies on their impact on the probability of banking crises. This paper therefore investigates whether rising conflict and political instability globally over the past several decades led to increased occurrence of banking crises in developing countries. The paper provides strong evidence that conflicts and political instability are indeed associated with higher probability of systemic banking crises. Unsurprisingly, the duration of a conflict is positively associated with rising probability of a banking crisis. Interestingly, the paper also finds that conflicts and political instability in one country can have negative spillover effects on neighboring countries’ banking systems. The paper provides evidence that the primary channel of transmission is the occurrence of fiscal crises following a conflict or political instability.
    Keywords: Banking crisis;Balance sheets;Economic recession;Banking sector;Real effective exchange rates;conflict,political instability,banking crises,fiscal crises,WP,bank crisis,fiscal crisis,cabinet change,government crisis
    Date: 2020–02–28
  19. By: Ratna Sahay; Ulric Eriksson von Allmen; Amina Lahreche; Purva Khera; Sumiko Ogawa; Majid Bazarbash; Kimberly Beaton
    Abstract: Technology is changing the landscape of the financial sector, increasing access to financial services in profound ways. These changes have been in motion for several years, affecting nearly all countries in the world. During the COVID-19 pandemic, technology has created new opportunities for digital financial services to accelerate and enhance financial inclusion, amid social distancing and containment measures. At the same time, the risks emerging prior to COVID-19, as digital financial services developed, are becoming even more relevant.
    Keywords: Financial inclusion;Technological innovation;Financial services;Financial services industry;Contagious diseases;Financial crises;Financial institutions;Macroprudential policies and financial stability;COVID-19,Pandemic,Fintech,,DPPP,DP,digital infrastructure,traditional financial institution,financial literacy,gender gap,digital literacy
    Date: 2020–07–01
  20. By: Jon Frost; Leonardo Gambacorta; Romina Gambacorta
    Abstract: This paper analyses the role of financial development and financial technology in driving inequality in (returns to) wealth. Using micro data from the Survey on Household Income and Wealth (SHIW) conducted by the Bank of Italy for the period 1991-2016, we find evidence of the "Matthew effect" - a capacity of wealthy households to achieve higher returns than other households. With an instrumental variable approach, we find that financial development (number of bank branches) and financial technology (use of remote banking) both have a positive association with households' financial wealth and financial returns. While households of all wealth deciles benefit from the effects of financial development and financial technology, these benefits are larger when moving towards the top of the wealth distribution. Still, the economic significance of this gap fell in the last part of the sample period, as remote banking became more widespread.
    Keywords: inequality, financial development, banks, financial technology, fintech
    JEL: G10 G21 O15 D63
    Date: 2020–07
  21. By: Serhan Cevik; Carolina Correa-Caro
    Abstract: This paper investigates the main determinants of income inequality in transition countries during the period 1990–2018. To this end, we address a major methodological challenge that lies at the core of the cross-country literature on income inequality: the potential endogeneity of income growth, which is largely ignored by most empirical studies. We adopt a two-pronged empirical strategy by (i) using trading partners’ weighted average real GDP as an instrumental variable (IV), and (ii) estimating the model via the two-stage least squares (2SLS) approach for static models and the Generalized Method of Moments (GMM) estimator for dynamic models. Our empirical findings are consistent with the Kuznets curve that illustrates a nonlinear relationship between income inequality and the level of economic development. We also find that the redistributive impact of fiscal policy is statistically insignificant and taxation and government spending appear to have the opposing effects on income inequality in transition economies.
    Keywords: Income inequality;Economic reforms;Economic growth;Demographic indicators;Income distribution;fiscal policy,transition economies,WP,Gini coefficient,Gini,transition economy,control variable,financial development
    Date: 2020–02–14
  22. By: Das, Bijoy Chandra; Sutradhar, Soma Rani
    Abstract: This paper evaluates the impact of COVID-19 pandemic on the inflow of remittances in Bangladesh. A Tableau dashboard is designed on total remittance received and COVID-19 confirmed cases along with the death of remitter countries for January and February of 2020. This pandemic has already been declined remittance inflow. Scenario analysis is calculated on remittances of 2018-19 to represent the inflow of remittance for evaluating the impact of COVID-19 on the economy of Bangladesh for short, medium, and long term. Currently, the remitter countries are locked down, closed the businesses, made the people jobless. This study indicates the negative effect of COVID-19 on remittance inflow, ultimately on GDP growth.
    Keywords: COVID-19, Remittances, Pandemic, Lockdown, GDP
    JEL: F2 F24 J6 J62 O15
    Date: 2020–06–19
  23. By: Sami Ben Naceur; Ralph Chami; Mohamed Trabelsi
    Abstract: This paper explores the relationship between remittances and financial inclusion for a sample of 187 countries over the period 2004-2015, using cross-country as well as dynamic panel GMM regressions. At low levels of remittances-to-GDP, these flows act as a substitute to formal financial channels, thereby reducing financial inclusion. In contrast, when remittance-to-GDP ratio is high, above 13% on average, they tend to complement formal access and usage channels, thus enhancing financial inclusion. This “U shaped” relationship highlights the role of remittance flows in financing household consumption at low levels, while raising formal household bank savings and allowing for more intermediation, at high levels of remittance-to-GDP.
    Date: 2020–05–22
  24. By: Armand Fouejieu; Anta Ndoye; Tetyana Sydorenko
    Abstract: Countries in the MENAP and CCA regions have the lowest levels of financial inclusion of small and medium enterprises (SMEs) in the world. The paper provides empirical evidence on the drivers of SME access to finance for a large sample of countries, and identifies key policy priorities for these two regions: economic and institutional stability, competition, public sector size and government effectiveness, credit information infrastructure (e.g., credit registries), the business environment (e.g., legal frameworks for contract enforcement), and financial supervisory and regulatory capacity. The analysis also shows that improving credit information, economic competition, the business environment along with economic development and better governance would help close the SME financial inclusion gap between MENAP and CCA regions and the best performers. The paper concludes on the need to adopt holistic policy strategies that take into account the full range of macro and institutional requirements and reforms, and prioritize these reforms in accordance with each country’s specific characteristics.
    Keywords: Financial crises;Financial services;Macroprudential policies and financial stability;Bank credit;Financial systems;Small and Medium Sized Enterprises,Financial Inclusion,WP,SME,SMEs,CCA,risky borrower,informality
    Date: 2020–03–13
  25. By: Caroline Roulet
    Abstract: Over the past two decades, Asian economies have experienced rapid capital market growth and profound changes in the structure of their financial systems. This paper analyses key developments in advanced and emerging Asian economies since the global financial crisis, focusing on market intermediation of sovereign and corporate debt, equity market development, and the growth of alternative finance and structured products. This enables a forward-looking assessment of the extent to which developments in the medium term may contribute to rising risks in the stability of financial intermediation and sustainable long-term growth with a view to informing policy discussions on economic opportunities and associated risks.
    JEL: F34 F42 G21 G23
    Date: 2020–07–21

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