|
on Financial Development and Growth |
| By: | PINSHI, Christian P.; KABEYA, Anselme M. |
| Abstract: | This paper aims to verify the causal relationship between financial development and economic growth in the Democratic Republic of Congo (DRC) using data from 2004 to 2019. The dynamic Granger causality analysis is used to analyze the variables. The results indicate that there is a robust, one-way relationship from economic growth to financial development. This result confirms the Demand-following hypothesis that economic growth drives the development of the financial system. Therefore, policies to promote economic growth, such as the accumulation of human capital, macroeconomic stabilization, rehabilitation of key infrastructure, structural reforms and the creation of a good economic environment for the private and regulatory sector, are crucial to improve financial development in the DRC. |
| Keywords: | Financial development, economic growth, Democratic Republic of the Congo |
| JEL: | G2 O4 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:101394&r=all |
| By: | Sergio Salas |
| Abstract: | There is by now reasonable evidence that supports the notion of a trend break in the US GDP since the Great Recession. To explain this phenomenon, I construct a version of the Lucas endogenous growth model, amplified with financial frictions and financial disruptions in the firms' sector. I then show how a transitory liquidity crunch is capable, at least qualitatively, of producing a similar pattern of a persistent downward shift in the GDP trend as one could infer happened in the US since 2008. The main mechanism by which such a result is found relies on workers' decisions on providing labor to firms versus accumulating human capital. I show that a transitory liquidity crunch reduces the demand of labor. Workers anticipating a phase of depressed wages make the decision of accumulating more human capital in the short run, thereby reducing labor supply to firms. In the long run, however, incentivized by a strong recovery, workers decrease human capital accumulation and increase labor supply. Under plausible parametrizaions of the model, this situation produces a net effect of a decrease in overall productivity that permanently reduces the trend at which the economy was growing prior to the crisis. |
| Keywords: | endogenous growth, liquidity crises, human capital |
| JEL: | O4 G01 E44 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:ucv:wpaper:2020-02&r=all |
| By: | Kangni R Kpodar; Maelan Le Goff; Raju J Singh |
| Abstract: | This paper contributes to the literature by looking at the possible relevance of the structure of the financial system—whether financial intermediation is performed through banks or markets—for macroeconomic volatility, against the backdrop of increased policy attention on strengthening growth resilience. With low-income countries (LICs) being the most vulnerable to large and frequent terms of trade shocks, the paper focuses on a sample of 38 LICs over the period 1978-2012 and finds that banking sector development acts as a shock-absorber in poor countries, dampening the transmission of terms of trade shocks to growth volatility. Expanding the sample to 121 developing countries confirms this result, although this role of shock-absorber fades away as economies grow richer. Stock market development, by contrast, appears neither to be a shock-absorber nor a shock-amplifier for most economies. These findings are consistent across a range of econometric estimators, including fixed effect, system GMM and local projection estimates. |
| Keywords: | Financial sector development;Economic stabilization;Real sector;International capital markets;Terms of trade;Banks,stock markets,terms of trade shocks,growth volatility,volatility,GMM,financial development,shock-absorber,sector development |
| Date: | 2019–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2019/068&r=all |
| By: | Simplice A. Asongu (Yaounde, Cameroonj); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria); Paul N. Acha-Anyi (Walter Sisulu University, South Africa) |
| Abstract: | This study investigates the simultaneous openness hypothesis by assessing the importance of trade openness in modulating the effect of foreign direct investment (FDI) on economic dynamics of gross domestic product (GDP) growth, real GDP and GDP per capita. The focus of the study is on 25 countries in Sub-Saharan Africa over the period spanning from 1980 to 2014. First, trade imports modulate FDI to induce net positive effects on GDP growth and GDP per capita. Second, trade exports moderate FDI to generate overall positive impacts on GDP growth, real GDP and GDP per capita. Implications of the study are discussed, inter alia: (i) both FDI and trade infrastructures are necessary for FDI-focused measures to engender positive economic development outcomes in host communities and countries. (ii) Macroeconomic conditions that are relevant for promoting economic development are necessary for the interactions between trade openness and FDI to generate favorable outcomes in terms of GDP growth, real GDP and GDP per capita. |
| Keywords: | Economic Output; Foreign Investment; Sub-Saharan Africa |
| JEL: | E23 F21 F30 L96 O55 |
| Date: | 2020–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:20/056&r=all |
| By: | Rahman, Md. Nafizur; Nower, Nowshin; Abbas, Syed Mahdee; Nahian, Abdullah Hill; Tushar, Md. Raqibul Hasan |
| Abstract: | This study aims at investigating the prospects of a bond market in Bangladesh. Most of the developed and developing economies have an active and successful bond market. But Bangladesh despite being one of the fastest-growing economies, does not have an active bond market. Hence, this study was designed to investigate the impact of a bond market on the economic growth of Asian countries and what are the prospects and challenges in Bangladesh. To investigate the benefits of a bond market in Bangladesh, this study examined the relationship between bond market return and economic growth of 4 Asian economies which included, India, Indonesia, Hong Kong, and Japan. The average annual yield of 10-year bonds was used as the independent variable and the annual GDP growth rate of these countries was used as the dependent variable in the econometric model. Data for the last 20 years from 2000 to 2019 were used for all the variables. The Unit Root Test showed that 3 variables were stationary at first difference and the other five variables were stationary at level. The Johansen Co-integration test identified the long-run association among the variables indicating the long-run relationship between bond market return and economic growth. Granger Causality revealed a bi-directional relationship for India; unidirectional relationship for Indonesia (Bond GDP growth) and Japan (GDP Growth Bond); and no unidirectional or bidirectional relationship among the bond market return and economic growth of Hong Kong. The various new projects, the overextension of the banking sector, and perhaps the overall good condition of the economy has created the perfect situation to develop a bond market in Bangladesh. As there are conditions that provide advantages in bond market creation, there are also various challenges that the government must overcome. Some of the most important challenges to clear up are the underdeveloped tax system, the illiquid or absent secondary market, the alternative source of debt, and the overall lack of investors. Considering the various developed bond markets these policy implications could seriously aid the development process. |
| Keywords: | GDP growth, Johansen Co integration Test, Granger Causality, Bond Market |
| JEL: | G1 G15 G2 O4 |
| Date: | 2020–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:101159&r=all |
| By: | Sami Ben Naceur; Bertrand Candelon; Quentin Lajaunie |
| Abstract: | This paper assesses whether and how financial development triggers the occurrence of banking crises. It builds on a database that includes financial development as well as financial access, depth and efficiency for almost 100 countries. Through estimation of a dynamic logit panel model, it appears that financial development, from an institutional dimension and to a lesser extent from a market dimension, triggers financial instability within a one- to two-year horizon. Additionally, whereas financial access is destabilizing for advanced countries, it is stabilizing for emerging and low income ones. Both results have important implications for macroprudential policies and financial regulations. |
| Keywords: | Real interest rates;Negative interest rates;Financial safety nets;Exchange markets;Interest rate increases;financial Development,Banking crises,Regulation,bank crisis,logit,logit model,sub-indices |
| Date: | 2019–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2019/094&r=all |
| By: | Gjergj Legisi (Bank of Albania) |
| Abstract: | The credit-to-GDP gap is a fundamental indicator used to identify credit bubbles. Currently, the indicator takes into account aggregate credit as a ratio of GDP, without distinguishing between local and foreign currency. In the Albanian financial system, foreign currency loans comprise about fifty percent of the total credit. Due to the large share of foreign currency loans, this paper evaluates the credit-to-GDP gap by local (Albanian lek) and foreign (Euro and US dollar) currency to assess their performance in identifying credit bubbles. This study concludes that using a modified version of credit-to-GDP gap, which extracts foreign currency fluctuations, provides a better overall performance than the standard approach. In addition, a split credit-to-GDP gap according to local and foreign currency provides similar performance to the standard and modified approach, but offers a more structure-based approach. |
| Keywords: | credit-to-GDP gap, foreign currency credit, countercyclical capital buffer. |
| JEL: | E44 G01 G18 |
| Date: | 2020–08–05 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp13-2020&r=all |
| By: | Delle-Monache, Davide (Bank of Italy); De-Polis, Andrea (University of Warwick); Petrella, Ivan (University of Warwick) |
| Abstract: | We investigate the relation between downside risk to the economy and the financial markets within a fully parametric model. We characterize the complete predictive distribution of GDP growth employing a Skew-t distribution with time- varying location, scale, and shape, for which we model both secular trends and cyclical changes. Episodes of downside risk are characterized by increasing negative asymmetry, which emerges as a clear feature of the data. Negatively skewed pre- dictive distributions arise ahead and during recessions, and tend to be anticipated by tightening of financial conditions. Indicators of excess leverage and household credit outstanding are found to be significant drivers of downside risk. Moreover, the Great Recession marks a significant shift in the unconditional distribution of GDP growth, which has featured a distinct negative skewness since then. The model delivers competitive out-of-sample (point and density) forecasts, improving upon standard benchmarks, especially due to financial conditions providing a strong signal of increasing downside risk. |
| Keywords: | business cycles ; financial conditions ; downside risk ; skewness ; score-driven models ; |
| JEL: | E37 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:wrkemf:34&r=all |
| By: | Christian Saborowski; Florian Misch |
| Abstract: | This paper examines the variation in life cycle growth across the universe of Mexican firms. We establish two stylized facts to motivate our analysis: first, we show that firm size matters for development by illustrating a close correlation with state-level per capita incomes. Second, we show that few firms grow as much as their U.S. peers while the majority stagnates at less than twice their initial size. To gain insights into the distinguishing characteristics of the two groups, we then econometrically decompose life cycle growth across firms. We find that firms that have financial access and multiple establishments and that are formal, part of diversified industries and located in population centers can grow at sizeable rates. |
| Keywords: | Social security;Economic growth;Development;Services industry;Manufacturing sector;Firm size,Firm growth,Life cycle dynamics,Distortions,Klenow,initial size,Mexican firm,Hsieh,Saborowski |
| Date: | 2019–05–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2019/087&r=all |
| By: | Dünhaupt, Petra; Herr, Hansjörg |
| Abstract: | The catching-up of countries in the Global South to productivity levels and living standards of the Global North is the exception. There are two main economic explanations for this. First, developing countries are pushed to low-tech-labor-intensive productions and tasks in global value chains. This offers some advantages, for example easier industrialisation, but also prevents upgrading. Foreign direct investment only partially helps to overcome this problem. Second, low trust in national currencies in the Global South leads to distorted financial markets which do not provide sufficient credit for investment. As part of needed industrial policy, national development banks can play a key role in triggering the economic catching-up of the Global South. They can alleviate distortions in the financial system and at the same time support the transformation of the economy towards higher productivity and ecological transformation. The German development bank KfW can serve as a useful example of an effective development bank. |
| Keywords: | Trade Theory,Economic Development,Global Value Chains,Industrial Policy,Financial Systems,Dollarisation,Development Banks |
| JEL: | E44 F10 F63 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ipewps:1432020&r=all |
| By: | Eita, Joel Hinaunye; Pedro, Marcio Jose |
| Abstract: | The study investigates the determinants of total factor productivity in selected sectors of the Angolan economy for the period of 1995 and 2017. The empirical results indicate that foreign direct investment is positively and significantly associated with an increase in total factor productivity in all sectors. Moreover, openness of the economy and the exchange rate have a positive impact on total factor productivity in the manufacturing sector. However, the impact of these two variables is negative on total factor productivity in the primary and service sectors. Furthermore, the study results reveals that an increase in inflation causes a decrease in total factor productivity in the manufacturing and service sectors, whilst positively associated with an increase in total factor productivity in the primary sector. Finally, official development assistance has a negative effect on total factor productivity in the primary and service sectors, whilst having a positive effect on total factor productivity in the manufacturing sector. The results imply that to ensure sustainable total factor productivity growth, Angola should pursue policies that attract foreign direct investment. The effect of other variables such as openness of the economy, inflation, official development assistance and exchange rate depends on sectors. This suggest that it is important to come up with policies, which are sector-specific in order to improve total factor productivity growth. |
| Keywords: | Angola; total factor productivity; ARDL |
| JEL: | C13 C50 C51 O4 O49 |
| Date: | 2020–01–31 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:101304&r=all |
| By: | Christian Abele (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Agnès Bénassy-Quéré (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Lionel Fontagné (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | We analyse the impact of both the Global Financial Crisis of 2008 and the European sovereign and banking crisis of 2011-13 on firm-level productivity in France, Italy and Spain. We firstly show that relying on a single break date in 2008 misses both the euro crisis and countries' institutional speci_cities. Secondly, although leverage and financial constraints affect firm-level productivity negatively, high-leverage firms su_er more from financial constraints only in Italy, when they are relatively small or when their debt is of short maturity. These results, which are robust to a series of alternative explanations, call for approaches taking into consideration country-level characteristics of financial institutions and time varying _nancing constraints of the firms, instead of pooling data and adopting a common break date. One size does not fit all when it comes to identifying the impact of financial crises on firm level productivity. |
| Keywords: | total factor productivity,firm-level data,financial constraints,crises |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-02883685&r=all |
| By: | Schularick, Moritz; Steffen, Sascha; Tröger, Tobias |
| Abstract: | Do current levels of bank capital in Europe suffice to support a swift recovery from the COVID-19 crisis? Recent research shows that a well-capitalized banking sector is a major factor driving the speed and breadth of recoveries from economic downturns. In particular, loan supply is negatively affected by low levels of capital. We estimate a capital shortfall in European banks of up to 600 billion euro in a severe scenario, and around 143 billion euro in a moderate scenario. We propose a precautionary recapitalization on the European level that puts the European Stability Mechanism (ESM) center stage. This proposal would cut through the sovereign-bank nexus, safeguard financial stability, and position the Eurozone for a quick recovery from the pandemic. |
| Keywords: | bank capital,financial stablity,COVID-19 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewh:69&r=all |
| By: | Besley, Timothy; Van Reenen, John; Roland, Isabelle |
| 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. JEL Classification: D24, E32, L11, O47 |
| Keywords: | credit frictions, default risk, misallocation, productivity |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20202425&r=all |
| By: | Giovanni Caggiano; Efrem Castelnuovo; Richard Kima; Silvia Delrio |
| Abstract: | This paper quantifies the finance uncertainty multiplier (i.e., the magnifying effect of the real impact of uncertainty shocks due to financial frictions) by relying on two historical events related to the US economy, i.e., the large jump in financial uncertainty occurred in October 1987 (which was not accompanied by a deterioration of the credit supply conditions), and the comparable jump in financial uncertainty in September 2008 (which went hand-in-hand with an increase in financial stress). Working with a VAR framework and a set-identification strategy which focuses on - but it is not limited to - restrictions related to these two dates, we estimate the finance uncertainty multiplier to be equal to 2, i.e., credit supply disruptions are found to double the negative output response to an uncertainty shock. We then employ our model to estimate the overall economic cost of the COVID-19-induced uncertainty shock under different scenarios. Our results point to the possibility of a cumulative yearly loss of industrial production as large as 31% if credit supply gets disrupted. Liquidity interventions that keep credit conditions as healthy as they were before the COVID-19 uncertainty shock are found to substantially reduce such loss. |
| Keywords: | Uncertainty shocks, finance-uncertainty multiplier, set-identification, VAR, financial frictions, COVID-19 |
| JEL: | C32 E32 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2020-67&r=all |
| By: | Greenwald, Daniel L.; Lettau, Martin; Ludvigson, Sydney |
| Abstract: | We provide novel evidence on the driving forcesbehind the sharp increase in equity values over the post-war era. From the beginning of 1989 to the end of 2017, 23 trillion dollars of real equity wealth was created by the nonfinancial corporate sector. We estimate that 54% of this increase was attributable to a reallocation of rents to shareholders in a decelerating economy. Economic growth accounts for just 24%, followed by lower interest rates (11%) and a lower risk premium (11%). From 1952 to 1988 less than half as much wealth was created, but economic growth accounted for 92% of it. |
| JEL: | G10 G12 G17 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14200&r=all |
| By: | Davis, Josh; Taylor, Alan M. |
| Abstract: | Research finds strong links between credit booms and macroeconomic outcomes like financial crises and output growth. Are impacts also seen in financial asset prices? We document this robust and significant connection for the first time using a large sample of historical data for many countries. Credit boom periods tend to be followed by unusually low returns to equities, in absolute terms and relative to bonds. Return predictability due to this leverage factor is distinct from that of established factors like momentum and value and generates trading strategies with meaningful excess profits out-of-sample. These findings pose a challenge to conventional macro-finance theories. |
| Keywords: | asset allocation; Asset Pricing; Cycles; debt; leverage; return predictability |
| JEL: | E17 E20 E21 E32 E44 G01 G11 G12 G17 G21 N10 |
| Date: | 2019–11 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14115&r=all |
| By: | Danilov, Yuriy (Данилов, Юрий) (The Russian Presidential Academy of National Economy and Public Administration); Pivovarov, Danil (Пивоваров, Данил) (The Russian Presidential Academy of National Economy and Public Administration); Davydov, Igor (Давыдов, Игорь) (The Russian Presidential Academy of National Economy and Public Administration) |
| Abstract: | The paper investigates the problems of determining the main factors (determinants) of financial development, as well as identifying the nature of the influence of these factors on the level of financial development. Based on an analysis of the literature on empirical studies of the impact of indicators of various nature on the characteristics of financial development, as well as theoretical concepts that describe the determinants of financial development, we have compiled a large list of such determinants and divided it into groups. Further, within each group, we conducted a regression analysis of the influence of determinants on the level of financial development, using an intercountry data panel, broken down by group of countries by income level. For the first time, the Financial Development Index, calculated by the IMF, as the best characteristic of financial development, including various aspects of this development, was used as an exogenous variable. Based on the analysis, the most significant (within the relevant groups) determinants of financial development were identified. Applying the results to Russian conditions, we took into account the presence of a number of features of the Russian economy and the Russian financial sector, which generally negatively affect financial development. |
| Date: | 2020–04 |
| URL: | http://d.repec.org/n?u=RePEc:rnp:wpaper:042013&r=all |
| By: | Giulia Bettin (Universita' Politecnica delle Marche and MoFiR (IT)); Claudia Pigini (Universita' Politecnica delle Marche); Alberto Zazzaro (Universita' degli Studi di Napoli Federico II) |
| Abstract: | We estimate the causal e ect of Financial inclusion on transition probabilities into and out of poverty. By exploiting a longitudinal sample from the Bank of Italy's Survey on Household Income andWealth between 2002 and 2016, we find that financial inclusion is effective in both reducing the likelihood of falling into poverty and helping poor people to improve economic conditions and get out of their poverty status. According to our baseline estimates, the access to a deposit account actually reduces the risk of falling below the poverty line by 3 percentage points and increases the chance of exiting poverty by 5 percentage points. The significance and the magnitude of such effects are confirmed also when considering alternative proxies for financial inclusion (availability of debit/credit/pre-paid cards, use of remote banking services) and are robust to alternative empirical strategies (bivariate model with overidentifying restrictions) and to misspeci cation problems related to omitted factors, such as the level of household indebtedness. |
| Keywords: | poverty, financial inclusion, state dependence |
| JEL: | C23 D14 I32 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:anc:wmofir:164&r=all |
| By: | Sarwat Jahan; Jayendu De; Fazurin Jamaludin; Piyaporn Sodsriwiboon; Cormac Sullivan |
| Abstract: | Financial inclusion is a multidimensional concept and countries have chosen diverse methods of enhancing financial inclusion with varying degrees of results. The heterogeneity of financial inclusion is particularly striking in the Asia-Pacific region as member countries range from those that are at the cutting edge of financial technology to others that are aiming to provide access to basic financial services. The wide disparity is not only inter-country but also intra-country. The focus of this paper is to take stock of the current state of financial inclusion in the Asia-Pacific region by highlighting twelve stylized facts about the state of financial inclusion in these countries. The paper finds that the state of financial inclusion depends on several factors, but a holistic approach calibrated to specific country conditions may lead to greater financial inclusion. |
| Keywords: | Financial inclusion;Financial services;Financial institutions;Financial infrastructure;Macroprudential policies and financial stability;Emerging Markets,Developing Asia,Pacific Islands,Asia-Pacific,Asia-Pacific region,financial development,Asia-Pacific country,financial service |
| Date: | 2019–04–19 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2019/079&r=all |
| By: | 1; 1; 1 |
| Abstract: | 1 |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:cty:dpaper:20/06&r=all |
| By: | Pelin Berkmen; Kimberly Beaton; Dmitry Gershenson; Javier Arze del Granado; Kotaro Ishi; Marie Kim; Emanuel Kopp; Marina V Rousset |
| Abstract: | In Latin America and the Caribbean (LAC), financial technology has been growing rapidly and is on the agenda of many policy makers. Fintech provides opportunities to deepen financial development, competition, innovation, and inclusion in the region but also creates new and only partially understood risks to consumers and the financial system. This paper documents the evolution of fintech in LAC. In particular, the paper focuses on financial development, fintech landscape for domestic and cross border payments and alternative financing, cybersecurity, financial integrity and stability risks, regulatory responses, and considerations for central bank digital currencies. |
| Keywords: | Central banks;Central bank role;Central bank legislation;Central bank accounting;Bank credit;Fintech,cross border payments,financial sector,financial regulation,financial stability and integrity,cyber risk,cyber regulation,monetary policy,digital currencies,competition.,cybersecurity,remittance,alternative finance,financial development,CFT |
| Date: | 2019–03–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2019/071&r=all |
| By: | Ons Mastour (Central Bank of Tunisia) |
| Abstract: | We study the relationship between the strength of the bank credit channel (BCC) of monetary policy transmission and real GDP growth in Tunisia using quarterly commercial bank-level data between 2008 and 2019. We find evidence of the existence of the bank credit channel in Tunisia in both its broad and strict senses. Classification of banks by total assets allows us to conclude that funding-constrained banks are very reactive to changes in the policy rate regardless of the economic cycle. However, identification of the strength of the BCC during different economic cycles is not possible in our case due to the lack of significance of the coefficients of interest. Furthermore, we find that the BCC operated exclusively through specific loan categories and banks during the sample period. |
| Keywords: | Bank lending channel; monetary policy transmission; bank balance sheet channel; GDP growth. |
| JEL: | E3 E5 G2 |
| Date: | 2020–08–04 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp12-2020&r=all |
| By: | Rajeswari Sengupta (Indira Gandhi Institute of Development Research); Harsh Vardhan (S.P. Jain Institute of Management and Research) |
| Abstract: | In this paper we analyse the beneficiaries of productivity gains in the Indian banking sector during the period from 1992 to 2019. We document the relative efficiency of different groups of banks by ownership. We find that the Indian banking sector, particularly the public sector banks experienced steady productivity growth from the mid 1990s till about 2010. We conduct a detailed descriptive analysis to examine the various stakeholders that the productivity gains have accrued to, over the years and across bank groups. We conclude that most of the gains may have accrued to the shareholders which for the public sector banks would mean the government. These gains presumably helped reduce the burden on the government of capitalising the public sector banks, especially during the 1997-2002 period of sharp rise in non performing assets. |
| Keywords: | Banking sector, Bank productivity, Beneficiaries, Efficiency gains |
| JEL: | G21 G28 D24 D61 |
| Date: | 2020–06 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2020-024&r=all |
| By: | Adegboro, Opeyemi Oluwole; Orekoya, Samuel; Adekunle, Wasiu |
| Abstract: | In recent times, policy makers have considered the financial sector as a vital factor for growth and development in a country. So many research efforts to address the resilience and well-being of the financial system have stressed the importance of diversity in the financial system. This study assesses the stability and diversity of the financial service sector in Nigeria. The study employed the use of data from Nigeria’s commercial banks’ financial report and the Central Bank of Nigeria (CBN) statistical bulletin for the period of 13years (2005:Q1 – 2017:Q4). The study adopted the Auto Regressive Distributed Lag Estimation technique to determine the long run and short run dynamics of the variable employed and the Hirshman Herfindahl Concentration Index for financial stability and diversity respectively. These analyses provided several findings such as a negative relationship between stability and total bank asset as a result of weak corporate governance among the regulatory bodies, a positive relationship between stability and loan asset, a positive insignificant relationship between stability and Real Gross Domestic Product due to poor level of financial coverage among the entire populace and finally the analysis reveals a fairly diversified financial system. The study recommends a strict supervisory and monitoring framework from both the Asset Management Company of Nigeria (AMCON) and the Central Bank of Nigeria (CBN) in the acquisition of the asset from the commercial banks. More so, the monetary authority should direct the commercial banks to give out loans with moderate interest rate and also control the inflationary pressures that might be posed as a result of the low interest rate through other instruments and finally in order to improve diversity in the financial system, the financial institutions particularly the commercial bank should fully inculcate the global idea of financial technology to deliver better financial service through technology solutions and also keep itself abreast of the pace of development in foreign countries financial service sector as this will gear them towards delivering better and innovative service to Nigerians. |
| Keywords: | Financial Stability, Financial Diversity, Z Score Total Bank Asset and Loan Asset |
| JEL: | G1 G14 G17 G21 G28 |
| Date: | 2019–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:100995&r=all |
| By: | NEIFAR, MALIKA |
| Abstract: | This paper consider Tunisian banks case study over the period 2005–2014. The long run comparison analysis based on t-test between interest-free banks (IFB) and conventional banks (CB) of bank specific factors indicates that there are difference between Islamic and conventional banks behavior. CB are found to be more stable, while IFB have better liquidity and are riskier than CB. In long run, It is found alo that 2011 Yesameen revolution has negative effect on CB stability and 2008 GFC has positive effect on IFB stability. This paper investigates also the short run stability question based on dynamic model for Z-score ratio of tunisian banks during the same period. The paper finds that the level of Z-score can be attributed to both macroeconomic conditions and banks’ specific factors. Z-score is found to respond in short term to macroeconomic conditions. Z-scores tends to increase when Interest rate (INTER) and Foreign Direct Investment (FDI) rise. While instability increase when Unemployment rises, Exchange rate depreciates, and Inflation is high. It is found alo that in short run, 2011 Yesameen revolution and 2008 GFC have a significant positive effect on tunisian bank stability. |
| Keywords: | Financial stability, Z-score, 2008 Global financial crisis (GFC), 2011 Yesameen tunisian revolution, Tunisia, Islamic bank (IB), conventional bank (CB), macroeconomic factors, and banks’ specific factors. |
| JEL: | E32 E44 G01 G21 G32 Z12 |
| Date: | 2020–06–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:101029&r=all |
| By: | Mohammad Abdul Malek; Nusrat Abedin Jimi; Subal Kumbhakar; Plamen Nikolov |
| Abstract: | Improving productivity among farm enterprises is important, especially in low-income countries where market imperfections are pervasive and resources are scarce. Relaxing credit constraints can increase the productivity of farmers. Using a field experiment involving in Bangladesh, we estimated the impact of access to credit on the overall productivity of rice farmers, and disentangled the total effect into technological change (frontier shift) and technical efficiency changes. We found that relative to the baseline rice output per decimal, access to credit resulted in, on average, approximately a 14 percent increase in yield, holding all other inputs constant. After decomposing the total effect into the frontier shift and efficiency improvement, we found that, on average, around 11 percent of the increase in output came from changes in technology, or frontier shift, while the remaining 3 percent was attributed to improvements in technical efficiency. The efficiency gain was higher for modern hybrid rice varieties, and almost zero for traditional rice varieties. Within the treatment group, the effect was greater among pure tenant and mixed-tenant farm households compared with farmers than only cultivated their own land. |
| Date: | 2019 |
| URL: | http://d.repec.org/n?u=RePEc:feb:natura:00709&r=all |
| By: | Enrico Biffis (Imperial College London); Erik Chavez (Imperial College London); Alexis Louaas (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - CNRS - Centre National de la Recherche Scientifique - X - École polytechnique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique); Pierre Picard (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - CNRS - Centre National de la Recherche Scientifique - X - École polytechnique - ENSAE ParisTech - École Nationale de la Statistique et de l'Administration Économique) |
| Abstract: | Technology adoption is crucial for the development of low income countries. This paper investigates how parametric insurance can contribute to improving access to finance, and hence to technology, for smallholder farmers. In a model with moral hazard, we show that bundling para-metric insurance with loans may lower collateral requirements, thus promoting the financial inclusion of poor households. The case of agricultural input loans and weather-index insurance is studied in detail and related to bundled finance solutions recently piloted among smallholder farmers in Tanzania. |
| Date: | 2020–06–19 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-02875530&r=all |
| By: | Suesse, Marvin; Wolf, Nikolaus |
| Abstract: | What determines the development of rural financial markets? Starting from a simple theoretical framework, we derive the factors shaping the market entry of rural microfinance institutions across time and space. We provide empirical evidence for these determinants using the expansion of credit cooperatives in the 236 eastern counties of Prussia between 1852 and 1913. This setting is attractive as it provides a free market benchmark scenario without public ownership, subsidization, or direct regulatory intervention. Furthermore, we exploit features of our historical set-up to identify causal effects. The results show that declining agricultural staple prices, as a feature of structural transformation, leads to the emergence of credit cooperatives. Similarly, declining bank lending rates contribute to their rise. Low asset sizes and land inequality inhibit the regional spread of cooperatives, while ethnic heterogeneity has ambiguous effects. We also offer empirical evidence suggesting that credit cooperatives accelerated rural transformation by diversifying farm outputs. |
| Keywords: | credit cooperatives; Land Inequality; Microfinance; Prussia; rural transformation |
| JEL: | G21 N23 O16 Q15 |
| Date: | 2019–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:14178&r=all |
| By: | Sangyup Choi (Yonsei Univ); Davide Furceri (IMF); João Tovar Jalles (IMF) |
| Abstract: | Empirical evidence to date suggests a positive relationship between fiscal policy countercyclicality and growth. But do all industries gain equally from countercyclical fiscal policy? What are the channels through which countercyclical fiscal policy affects industry-level growth? We answer these questions by applying a difference-in-difference approach to an unbalanced panel of 22 manufacturing industries for 55 countries—including both advanced and developing economies—during the period 1970-2014. Among the nine industry characteristics that we consider based on different theoretical channels, we find that the credit constraint channel—proxied by asset fixity—identifies the best transmission mechanism through which countercyclical fiscal policy enhances growth. This channel becomes stronger during periods of weak economic activity when credit constraints are more likely to bind. |
| Keywords: | countercyclical fiscal policy; time-varying coefficients; industry growth, technologies of production, credit constraints |
| JEL: | E62 H50 H60 |
| Date: | 2020–07 |
| URL: | http://d.repec.org/n?u=RePEc:yon:wpaper:2020rwp-176&r=all |
| By: | Amr Hosny |
| Abstract: | This paper contributes to the literature by introducing the role of geographic concentration of the source of remittances. Specifically, using data over 2010-2015 for 72 developing countries, we study the impact of (i) large remittances and (ii) the geographic concentration of the source of remittances on economic volatilities. Results suggest that while (i) large remittances can be stabilizing on average, (ii) high remittance concentration from source countries can aggravate economic volatilities in recipient countries. Results are robust to global shocks affecting both source and recipient countries, and volatility in the remittance-sending country. |
| Keywords: | Real effective exchange rates;Financial sector development;Exchange rate appreciation;Exchange rate regimes;Terms of trade;Remittances,volatility,remittance concentration,developing countries,WP,remittance,recipient country,HHI,remittance inflow |
| Date: | 2020–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2020/015&r=all |