nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2020‒09‒21
28 papers chosen by
Georg Man

  1. Financial development and Economic growth in the Democratic Republic of the Congo : Supply leading or Demand following? By PINSHI, Christian P.; KABEYA, Anselme M.
  2. Credit Market Imperfection, Lack of Entrepreneurs and Capital Outflow from a Developing Economy By Sugata Marjit; Suryaprakash Mishra
  3. Mediating roles of institutions in the remittance-growth relationship: evidence from Nigeria By Ibrahim A. Adekunle; Tolulope O. Williams; Olatunde J. Omokanmi; Serifat O. Onayemi
  4. Stress-testing a shock to remittances in a post-Covid world – what impact on liquidity? By Monahov, Alexandru
  5. Fostering investment of the family remittances in value chains : Case studies in the Dominican Republic, El Salvador and Guatemala By Padilla Pérez, Ramón; Stezano, Federico; Villarreal, Francisco G.
  6. Payments Crises and Consequences By Qian Chen; Christoffer Koch; Padma Sharma; Gary Richardson
  8. An empirical analysis of systemic and macroeconomic risk in South Africa: an application of the quantile regression By Eita, Joel Hinaunye; Ngobese, Sibusiso Blessing; Muteba Mwamba, John Weirstrass
  9. Relative impact of domestic and foreign public debt on economic growth in South Africa By Saungweme, Talknice; Odhiambo, Nicholas M
  10. Heterogenous Gains from Countercyclical Fiscal Policy: New Evidence from International Industry-level Data By Sangyup Choi; Davide Furceri; João Tovar Jalles
  11. Global Business and Financial Cycles: A Tale of Two Capital Account Regimes By Julien Acalin; Alessandro Rebucci
  12. The US, Economic News, and the Global Financial Cycle By Christoph E. Boehm
  13. A Study of Financial Cycles and the Macroeconomy in Taiwan By Chen, Nan-Kuang; Cheng, Han-Liang
  14. Measuring Global Financial Market Stresses By Jan J. J. Groen; Michael Nattinger; Adam I. Noble
  15. Bear Markets and Recessions verses Bull Markets and Expansions By Abdulnasser Hatemi-J
  16. Financial Frictions and the Wealth Distribution By Jesús Fernández-Villaverde; Samuel Hurtado; Galo Nuño
  17. The Macroeconomic Effects of Financialization and the Wage Gap between Blue and White Collar Workers By Parui, Pintu
  18. Insurance and inequality in Sub-Saharan Africa:Policy thresholds By Asongu, Simplice A; Odhiambo, Nicholas M
  19. Finance,governance and inclusive education in Sub-Saharan Africa By Asongu, Simplice A; Odhiambo, Nicholas M
  20. The transmission of savings to investment in Nigeria By Adedoyin Soyibo
  21. Macroeconomic constraints and medium-term growth in Kenya: a three-gap analysis By F. M. Mwega; Njuguna Mwangi; F.Ole We-Ochilo
  22. Government Capital Spending and Financing and its Impact on Private Investment in Kenya: 1964-2006 By Samuel O. Oyieke
  23. Do credit constraints affect agricultural technology adoption? Evidence from Nigeria By Balana, Bedru; Oyeyemi, Motunrayo; Benson, Todd
  24. Strapped for Cash? Funding for UK high growth SMEs since the global financial crisis By Brown, Ross; Lee, Neil
  25. The Effects of Digital Inclusive Finance on Household Income and Income Inequality in China? By Liu, Dan; Jin, Yanhong; Pray, Carl; Liu, Shuang
  26. FinTech and the COVID-19 Pandemic: Evidence from Electronic Payment Systems By Tut, Daniel
  27. The informal and semi-formal financial sectors in Ethiopia: a study of the iqqub, iddir, and savings and credit co-operatives By Dejene Aredo
  28. Climate Actions and Stranded Assets: The Role of Financial Regulation and Monetary Policy By Francesca Diluiso; Barbara Annicchiarico; Matthias Kalkuhl; Jan C. Minx

  1. By: PINSHI, Christian P.; KABEYA, Anselme M.
    Abstract: The purpose of this paper is to verify the direction of the relationship between financial development and economic growth in the Democratic Republic of the Congo (DRC). Using Granger's causality framework, the results indicate that there is a robust, one-way relationship ranging from economic growth to financial development. This result validates Demand following hypothesis in the DRC. Consequently, policies aimed at supporting economic growth, such as the accumulation of endogenous factors (knowledge, education, research), macroeconomic stabilization, reconstruction of infrastructure, structural reforms, creation of a good economic environment for the private and regulatory sectors, and good governance are very important for improving financial development in the DRC.
    Keywords: Economic growth, financial development, Democratic Republic of the Congo
    JEL: C32 E44 G20 G28 O16 O38 O44
    Date: 2020–06
  2. By: Sugata Marjit; Suryaprakash Mishra
    Abstract: This paper explores the impact of credit market on the entrepreneurs and demand for credit in a credit constrained economy and the resultant impact on the capital flows. In standard trade models the capital flows across countries are explained as a result of the rate of return differentials due to presence/absence of capital among the countries whereby capital flows from the capital rich countries to capital poor countries. We show that the rate of return differentials could arise due to presence/absence of entrepreneurs, i.e., low price of capital in autarky may reflect lack of demand for credit due to scarcity of entrepreneurs and not capital abundance and eventually may lead to capital outflow from a capital scarce country. This is a different way of echoing the sentiment of the well-known “Lucas Paradox” which suggests that capital might flow from the poor to the rich countries. We also show the possibility of trade and capital flow being complements and not substitutes, as is usual in standard models.
    Keywords: credit market imperfection, credit rationing, redistribution, entrepreneurs, capital flows
    JEL: F21 F36 D63 G21
    Date: 2020
  3. By: Ibrahim A. Adekunle (Olabisi Onabanjo University, Ago-Iwoye, Nigeria); Tolulope O. Williams (Olabisi Onabanjo University, Ago-Iwoye, Nigeria); Olatunde J. Omokanmi (Crown-Hill University, Eiyenkorin,Nigeria); Serifat O. Onayemi (Olabisi Onabanjo University, Ogun State, Nigeria)
    Abstract: In this study, we examine the mediating roles of institutions in the remittances growth relationship for some reasons. We found that no country-specific study has towed this line leaving a vacuum in the literature of development and international finance. Most studies along this dimension have been done as a continental panel study with significant attendant deficiencies. Heterogeneous nature of institutional arrangements in African nations makes findings on the moderation roles of institutions in the remittance-growth relationship regional specific. We rely on the autoregressive distributed lag (ARDL) estimation procedure to establish a clear line of thought on the interactions of the variables of interest. Short-run results revealed that remittances inflow positively influence growth, but when institutional factors interact with the remittances variables, only the regulatory quality measures from the product of interactions matters for growth. Nonetheless, long run results revealed that remittances inflow was negatively related with growth, but when interacted with institutional measures and regressed on growth outcomes, we found remittances to positively and statistically influence growth outcomes for all the institutional measures adopted. Therefore, recipient nations should improve on the design and enforcement of laws particularly about their regulatory quality and as well as quality assurance such that they could be positioned to attract increased remittances inflow as well as other sources of external financing needed to augment domestic productivity and growth.
    Keywords: Economic Growth, Remittances, Institutions, ARDL, Nigeria
    JEL: E01 E44 F24
    Date: 2020–01
  4. By: Monahov, Alexandru
    Abstract: Remittances have historically been a stable source of funding which has played a key role in the development efforts of many nations worldwide. As a consequence of the Covid crisis and the lockdown measures imposed to counteract the spread of the disease, the World Bank estimated a drop of 20% in remittances by the end of 2020. To study the effect that such a conjuncture would have on the financial stability of developing economies, this paper develops a remittance stress test that investigates the impact of the projected shock on banking sector liquidity at a country level. The study encompasses 112 countries and finds that small, emerging economies with underdeveloped financial sectors suffer the most, with six of the ten most affected nations experiencing a drop in their liquid asset ratios that would place their banking sector at significant liquidity risk.
    Keywords: remittances, stress test, liquidity risk, financial development, banking sector
    JEL: F24 F37 G21
    Date: 2020–06–30
  5. By: Padilla Pérez, Ramón; Stezano, Federico; Villarreal, Francisco G.
    Abstract: Family remittances represent an important source of resources and external financing for many Latin American and Caribbean countries, helping greatly to reduce poverty, increase private consumption, and boost national economic growth, among other things. Although a large share of remittances are intended to cover basic needs, such as food, health care and housing, some of them could be used to finance income-generating activities. This document summarizes the main findings of the technical collaboration project carried out by the Economic Commission for Latin America and the Caribbean (ECLAC) and the International Fund for Agricultural Development (IFAD) with the Governments of the Dominican Republic, El Salvador and Guatemala, focused on promoting the investment of remittances in rural value chains. Given the strictly private nature of family remittances, the strategies aimed at the recipients and senders of these resources always centred on the realization that the only way to secure investment of a portion of remittances was through incentives, advice and facilitation measures. This document offers a summary of the methodology used, the spaces in which remittances can be used to strengthen value chains, and the strategies and lines of action aimed at encouraging the investment of remittances in these value chains.
    Date: 2020–08–31
  6. By: Qian Chen; Christoffer Koch; Padma Sharma; Gary Richardson
    Abstract: Banking-system shutdowns during contractions scar economies. Four times in the last forty years, governors suspended payments from state-insured depository institutions. Suspensions of payments in Nebraska (1983), Ohio (1985), and Maryland (1985), which were short and occurred during expansions, had little measurable impact on macroeconomic aggregates. Rhode Island’s payments crisis (1991), which was prolonged and occurred during a recession, lengthened and deepened the downturn. Unemployment increased. Output declined, possibly permanently relative to what might have been. We document these effects using a novel Bayesian method for synthetic control that characterizes the principal types of uncertainty in this form of analysis. Our findings suggest policies that ensure banks continue to process payments during contractions – including the bailouts of financial institutions in 2008 and the unprecedented support of the financial system during the COVID crisis – have substantial value.
    JEL: C01 C11 E02 E32 E44 E58 G01 G2 G21 G28
    Date: 2020–08
  7. By: Emre Özçelik (Economics Program, Middle East Technical University, Northern Cyprus Campus, Northern Vyprus); Erdal Özmen (Department of Economics, Middle East Technical University, Ankara, Turkey)
    Abstract: We investigate patterns and globalisation-related causes of premature deindustrialisation (PD) using a large panel of advanced (AE), emerging (EME) and developing (DE) economies. We find that, PD tends to be the case for all EME and DE, except E. Asian countries. African countries appear to be hit worst by PD. Globalisation-related determinants of PD vary across country groups. Higher trade openness leads to deindustrialisation in DE. Trade openness, however, enhances dependent industrialisation in Latin American countries and the ‘factory economies’ of E. Asia, which have stronger linkages to global value chains. It is our contention that development possibilities can be expanded by aiming at higher technology activities and more intense forward-linkages to global value chains. Our findings suggest that such strategic industrial policies at the levels of EME and DE have the potential to generate growth convergence at international level. It is our contention that development possibilities can be expanded by aiming at more intense linkages to global value chains, but proactive industrial policies at the levels of EME and DE are required to achieve such expansion.
    Keywords: Developing Economies, Emerging Market Economies, Global Value Chains, Growth, Industrial Policy, Premature Deindustrialisation
    JEL: L60 O10 O14
    Date: 2020–01
  8. By: Eita, Joel Hinaunye; Ngobese, Sibusiso Blessing; Muteba Mwamba, John Weirstrass
    Abstract: This study conducts an empirical analysis on how the build-up of systemic risk in the financial system affects downside macroeconomic risk of the South African economy. The study outlines and apply several systemic risk measures, namely the conditional value at risk, principal component analysis, average conditional volatility and interest rate spreads. Thereafter, the study employs the quantile regression to evaluate the predictive ability of each systemic risk measures to lower quantiles of economic activity. The study reveals that each of the systemic risk measures are significant predictors of macroeconomic risk. The results of this study serve as important tools that can help South African financial regulators and policymakers to foresee and prevent systemic risk. It enables regulators to identify the build-up of systemic vulnerabilities, systemically important financial and too connected to fail institutions. These are useful in the sense that they serve as early warning signals of financial systemic risk and the consequences of such on macroeconomic outcomes.
    Keywords: systemic risk, macroeconomic risk, quantile regression, principal component analysis
    JEL: C22 C58 G01 G21
    Date: 2020–03–28
  9. By: Saungweme, Talknice; Odhiambo, Nicholas M
    Abstract: This paper investigates the debt-growth nexus by testing both the impact of aggregate public debt on economic growth, and the relative impact of domestic and foreign public debt on economic growth using South Africa as the case study ? from 1970 to 2017. Based on the autoregressive distributed lag (ARDL) technique, the findings reveal that the impact of aggregated public debt on economic growth in South Africa is statistically significant and negative, both in the short run and in the long run. The results further reveal that domestic public debt and economic growth have a statistically significant and positive relationship in the short run only. Furthermore, foreign public debt has a statistically significant and negative relationship with economic growth but only in the long run. Therefore, the study recommends the government to manage effectively its debt and to finance long-term high returning productive investments that should translate into economic growth. Finally, the study cautions the country against growing public debt, predominantly foreign debt, to finance its increasing recurrent expenditure needs.
    Keywords: Public debt, domestic public debt, foreign public debt, economic growth, South Africa
    Date: 2020–07
  10. By: Sangyup Choi (Yonsei University); 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: 2020–07–03
  11. By: Julien Acalin; Alessandro Rebucci
    Abstract: Using a new equity price-based measure of the global financial cycle, this paper evaluates the relative importance of global financial shocks for quarterly equity returns and output growths in a large sample of advanced and emerging economies, as well as in South Korea and China--two countries on different sides of the trilemma triangle of international finance. We document that global financial shocks in both China and South Korea explain a substantial share of equity return variability (20 and 50 percent of the total variance, respectively), but a much smaller portion of real output fluctuations (less than 10 percent in Korea and negligible in the case of China). We also find that the combination of a closer capital account and a more rigid exchange rate regime, as in China, is associated with some costs in terms of diversification opportunities quantified by very large exposures to domestic financial and real shocks, dwarfing the contribution of any other shock in the model. More surprisingly, the combination of a relatively open capital account and a flexible exchange rate, as in South Korea, not only is associated with higher exposure to the global financial cycle than in China but also with a significant incidence of domestic financial shocks on output fluctuations.
    JEL: C38 E42 F44 G15
    Date: 2020–08
  12. By: Christoph E. Boehm (University of Texas, Austin)
    Abstract: We provide evidence for a causal link between the US economy and the global financial cycle. Using a unique intraday dataset, we show that US macroeconomic news releases have large and significant effects on global risky asset prices. Stock price indexes of 27 countries, commodity prices, and the VIX all jump instantaneously upon news releases. The responses of stock indexes co-move across countries and are large -- often comparable in size to the response of the S&P 500. Further, these effects are persistent. US macroeconomic news explain up to 22% of the quarterly variation in foreign stock markets. The joint behavior of stock prices and long-term bond yields suggests that systematic monetary policy responses to news play a limited role for explaining the behavior of international stock markets. Instead, the evidence is consistent with a direct effect on investors' risk-taking capacity. Overall, our findings show that a byproduct of the United States' central position in the global financial system is that news about its business cycle have large effects on global financial conditions.
    Keywords: Global Financial Cycle; Macroeconomic announcements; International spillovers; Stock returns; VIX; Commodity prices; High-frequency event study
    JEL: E44 E52 F40 G12 G14 G15
    Date: 2020–09–04
  13. By: Chen, Nan-Kuang; Cheng, Han-Liang
    Abstract: his paper studies the characteristics of financial cycles (credit and house prices) and their interactions with business cycles in Taiwan. We employ multivariate structural time series model (STSM) to estimate trend and cyclical components in real bank credit, real house prices, and real GDP. We find that financial cycles are roughly twice the length of the business cycles, and house price cycles lead both credit and business cycles. Nevertheless, the estimated length of business and financial cycles in Taiwan is much shorter than those in industrialized economies. We then use machine learning to evaluate the importance of a macroeconomic variable that predicts downturns of financial cycles, by conducting both in-sample fitting and out-of-sample forecasting. Those macro variables selected by machine learning reflects Taiwan's close linkage in trades and financial interdependence with other countries such as China and spillover effects from the Fed's monetary policy.
    Keywords: financial cycle, credit, house prices, wavelet analysis, machine learning
    JEL: E32 E37 E44
    Date: 2020–06–23
  14. By: Jan J. J. Groen; Michael Nattinger; Adam I. Noble
    Abstract: We propose measures of financial market stress for forty-six countries and regions across the world. Our measures indicate that worldwide financial market stresses rose significantly in March following the widespread economic shutdowns in the wake of the COVID-19 pandemic. However, hardly anywhere in the world did these March peaks in financial stresses reach those seen during the trough of the 2007-09 Global Financial Crisis. Since March, financial market conditions normalized rapidly with financial market stresses around average levels. We also show that our financial stress measures have predictive power for the near-term economic outlook across most parts of the world, with the exception of China. A structural Bayesian VAR analysis indicates that historically, financial stress shocks, irrespective of the source of the shock, have significant impact on global economic activity, but in particular that emerging market economies are usually hit more severely than advanced economies.
    Keywords: financial markets; financial stress indices; emerging markets; advanced economies; SVAR
    JEL: C32 C51 E44 F30 F65
    Date: 2020–09–04
  15. By: Abdulnasser Hatemi-J
    Abstract: This paper examines the dynamic interaction between falling and rising markets for both the real and the financial sectors of the largest economy in the world using asymmetric causality tests. These tests require that each underlying variable in the model be transformed into partial sums of the positive and negative components. The positive components represent the rising markets and the negative components embody the falling markets. The sample period covers some part of the COVID19 pandemic. Since the data is non normal and the volatility is time varying, the bootstrap simulations with leverage adjustments are used in order to create reliable critical values when causality tests are conducted. The results of the asymmetric causality tests disclose that the bear markets are causing the recessions as well as the bull markets are causing the economic expansions. The causal effect of bull markets on economic expansions is higher compared to the causal effect of bear markets on economic recessions. In addition, it is found that economic expansions cause bull markets but recessions do not cause bear markets. Thus, the policies that remedy the falling financial markets can also help the economy when it is in a recession.
    Date: 2020–08
  16. By: Jesús Fernández-Villaverde; Samuel Hurtado; Galo Nuño
    Abstract: We postulate a nonlinear DSGE model with a financial sector and heterogeneous households. In our model, the interaction between the supply of bonds by the financial sector and the precautionary demand for bonds by households produces significant endogenous aggregate risk. This risk induces an endogenous regime-switching process for output, the risk-free rate, excess returns, debt, and leverage. The regime-switching generates i) multimodal distributions of the variables above; ii) time-varying levels of volatility and skewness for the same variables; and iii) supercycles of borrowing and deleveraging. All of these are important properties of the data. In comparison, the representative household version of the model cannot generate any of these features. Methodologically, we discuss how nonlinear DSGE models with heterogeneous agents can be efficiently computed using machine learning and how they can be estimated with a likelihood function, using inference with diffusions.
    Keywords: heterogeneous agents, wealth distribution, financial frictions, continuous-time, machine learning, neural networks, structural estimation, likelihood function
    JEL: C45 C63 E32 E44 G01 G11
    Date: 2020
  17. By: Parui, Pintu
    Abstract: In a post-Keynesian growth model with two types of workers (blue and white-collar workers), an attempt is taken to understand changes in financial behaviour and income distribution and their macroeconomic causes and consequences. For a relatively strong speed of adjustment in the financial market and a relatively weak reserve army effect, a stable steady state is achieved in the wage-led demand regime. Unlike Sasaki et. al. (2013), an endogenous and perpetual business cycles may emerge even in the wage-led demand regime. For a relatively strong reserve army effect, a contraction in the wage gap between white and blue-collar employments can make the steady state unstable. On the contrary, in a profit-led demand regime, a rise in the wage gap can destabilize the economy. A rise in the saving propensity of rentiers (and capitalist) is detrimental to aggregate demand and worsens the income distribution. A more regulated labour market and a rise in unionization are desirable as these can mitigate income inequality.
    Keywords: Financialization, Blue and white-collar workers, Wage gap, Post-Keynesian growth model, Limit cycles
    JEL: E12 E25 E32 E44 J31
    Date: 2020–06–28
  18. By: Asongu, Simplice A; Odhiambo, Nicholas M
    Abstract: In this study, we examine how insurance affects income inequality in sub-Saharan Africa, using data from 42 countries during the period 2004-2014. Three inequality variables are used, namely: the Gini coefficient, the Atkinson index and the Palma ratio. Two insurance premiums are employed, namely: life insurance and non-life insurance. The empirical evidence is based on the Generalized Method of Moments (GMM). Life insurance increases the Gini coefficient and increasing life insurance has a net positive effect on the Gini coefficient and the Atkinson index. Non-life insurance reduces the Gini coefficient and increasing non-life insurance has a net positive effect on the Palma ratio. The analysis is extended to establish policy thresholds at which increasing insurance premiums completely dampen the net positive effects. From the extended analysis, 7.500 of life insurance premiums (% of GDP) is the critical mass required for life insurance to negatively affect inequality, while 0.855 of non-life insurance premiums (% of GDP) is the threshold required for non-life insurance to negatively affect inequality. Policy thresholds are provided at which insurance penetration decreases income inequality in sub-Saharan Africa.
    Keywords: Insurance; Inclusive development; Africa; Sustainable Development
    Date: 2020–01
  19. By: Asongu, Simplice A; Odhiambo, Nicholas M
    Abstract: This research assesses the importance of credit access in modulating governance for gender inclusive education in 42 countries in Sub-Saharan Africa with data spanning the period 2004-2014.The Generalized Method of Moments is employed as empirical strategy. The following findings are established. First, credit access modulates government effectiveness and the rule of law to induce positive net effects on inclusive ?primary and secondary education?. Second, credit access also moderates political stability and the rule of law for overall net positive effects on inclusive secondary education. Third, credit access complements government effectiveness to engender an overall positive impact on inclusive tertiary education. Policy implications are discussed with emphasis on Sustainable Development Goals.
    Keywords: Finance; Governance; Sub-Saharan Africa; Sustainable Development
    Date: 2020–02
  20. By: Adedoyin Soyibo (University of Ibadan Ibadan, Nigeria)
  21. By: F. M. Mwega; Njuguna Mwangi; F.Ole We-Ochilo (Ministry of Planning and National Development, Kenya)
  22. By: Samuel O. Oyieke (University of Eastern Africa,Baraton)
  23. By: Balana, Bedru; Oyeyemi, Motunrayo; Benson, Todd
    Abstract: The agricultural sector in Nigeria is characterized by low productivity that is driven in part by low use of modern agricultural technologies. Poor access to credit is seen by many observers to be one of the key barriers to adoption of these technologies. Literature suggests that credit constraints impede individuals from investing in productivity enhancing agricultural technologies and, thus, poor farmers are unable to engage in high-return agricultural activities. Much policy discourse and research literature associates agricultural credit constraints with supply-side factors, such as farmers not having access to credit sources or high costs of borrowing, and, thus, recommend that such supply-side constraints be addressed to improve smallholders’ access to credit. However, demand-side factors, such as borrower’s risk-averse behavior, financial illiteracy, collateral requirements, or perceived high transactions costs, can also play important roles in credit-rationing for smallholder farmers.
    Keywords: NIGERIA; WEST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; credit; agriculture; technology; smallholders; agriculture extension; agricultural technology; credit access; adoption; demand-side constraints; supply-side constraints
    Date: 2020
  24. By: Brown, Ross; Lee, Neil
    Abstract: While high growth firms (HGFs) are crucial drivers of economic growth, to date there has been a dearth of research examining their funding requirements. Drawing on a survey of over 8,000 UK Small and Medium Sized Enterprises (SMEs), this paper investigates the capital structure and access to credit in high growth SMEs in the period following the global financial crisis. The findings challenge conventional wisdom about high growth SMEs in certain respects. They find it no harder than non-high growth SMEs to access external finance. The vast majority of high growth SMEs rely strongly on debt-based finance for their funding, not equity finance. High growth SMEs are much less likely to seek finance for working capital purposes but are no more likely to seek finance to invest in R&D than less rapidly growing SMEs. The findings suggest little justification for government intervention aimed at increasing credit availability for HGFs as currently espoused by the UK government.
    Keywords: Entrepreneurship; SMEs; Gazelles; Innovation; Access to finance; Policy
    JEL: O31 G21 G32
    Date: 2019–06–01
  25. By: Liu, Dan; Jin, Yanhong; Pray, Carl; Liu, Shuang
    Keywords: Agricultural Finance, Agribusiness, Community/Rural/Urban Development
    Date: 2020–07
  26. By: Tut, Daniel
    Abstract: This paper investigates the effects of the Covid-19 pandemic on financial institutions and consumers’ adoption of FinTech in payments. We find that the pandemic: [1] Initially had a negative impact on the adoption of FinTech, but favorable short-term regulatory changes have reversed some of the negative effects [2] The use of all electronic payment cards has significantly declined during the pandemic except for charge cards. We find an increase in the use of charge cards as consumers shift towards cheaper forms of payment [3] The pandemic has magnified interbank contagion and liquidity risks and has reduced both domestic and international electronic fund transfers via RTGS. The pandemic has also resulted in a deterioration in the quality of commercial banks’ assets and balance sheets [4] Remittance inflows via FinTech platforms have significantly declined reflecting contractions in global economic activities.
    Keywords: Covid-19, Coronavirus, Fintech, Mobile Payment, Central Banks, Financial Intermediaries, Financial Technologies, Banks, Interbank transfers, Diaspora Remittances, Settlement and Liquidity risks, clearing houses, financial stability, Pandemic, M-PESA, Digital Banking.
    JEL: E32 E52 E58 G21 G28 G32 O16 O31 O32 O33 O38 O55
    Date: 2020–07
  27. By: Dejene Aredo (University of Addis Ababa, Ethiopia)
  28. By: Francesca Diluiso; Barbara Annicchiarico; Matthias Kalkuhl; Jan C. Minx
    Abstract: Limiting global warming to well below 20C may result in the stranding of carbon-sensitive assets. This could pose substantial threats to financial and macroeconomic stability. We use a dynamic stochastic general equilibrium model with financial frictions and climate policy to study the risks a low-carbon transition poses to financial stability and the different instruments central banks could use to manage these risks. We show that, even for very ambitious climate targets, transition risks are limited for a credible, exponentially growing carbon price, although temporary “green paradoxes” phenomena may materialize. Financial regulation encouraging the decarbonization of the banks’ balance sheets via tax-subsidy schemes significantly reduces output losses and inflationary pressures but it may enhance financial fragility, making this approach a risky tool. A green credit policy as a response to a financial crisis originated in the fossil sector can potentially provide an effective stimulus without compromising the objective of price stability. Our results suggest that the involvement of central banks in climate actions must be carefully designed in compliance with their mandate to avoid unintended consequences.
    Keywords: climate policy, financial instability, financial regulation, green credit policy, monetary policy, transition risk
    JEL: E50 H23 Q43 Q50 Q58
    Date: 2020

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