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

  1. Financial Access and Productivity Dynamics in Sub-Saharan Africa By Asongu, Simplice
  2. Industrial Growth in Sub-Saharan Africa: Evidence from Machine Learning with Insights from Nightlight Satellite Images By Otchia, Christian; Asongu, Simplice
  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. Payments Crises and Consequences By Qian Chen; Christoffer Koch; Gary Richardson; Padma Sharma
  5. Exploring BIS credit-to-GDP gap critiques: the Swiss case By Terhi Jokipii; Reto Nyffeler; Stéphane Riederer
  6. Corporate Debt, Endogenous Dividend Rate, Instability and Growth By Parui, Pintu
  7. Rethinking inequality in the 21st century – inequality and household balance sheet composition in financialized economies By Szymborska, Hanna Karolina
  8. When is Debt Odious? A Theory of Repression and Growth Traps By Viral V. Acharya; Raghuram G. Rajan; Jack B. Shim
  9. Efectos asimétricos de la inversión pública sectorial sobre el crecimiento económico By Ricardo Molina Díaz; Pablo Cachaga Herrera
  10. Financial Inclusion and Poverty Transitions: An Empirical Analysis for Italy By Giulia Bettin; Claudia Pigini; Alberto Zazzaro
  11. Combating Poverty and Inequality: Social Network Structure, Microfinance Performance and Poverty Alleviation Effects By Wu, Benjian; Cui, Yi
  12. Access to credit and heterogeneous effects on agricultural technology adoption: Evidence from large rural surveys in Ethiopia By Regassa, Mekdim D.; Melesse, Mequanint B.
  13. Contract Structure, Time Preference, and Technology Adoption By Chowdhury, Shyamal; Smits, Joeri; Sun, Qigang
  14. Does Social Pressure Hinder Entrepreneurship in Africa? The Forced Mutual Help Hypothesis By Philippe Alby; Emmanuelle Auriol; Pierre Nguimkeu
  15. The Baker Hypothesis By Anusha Chari; Peter Blair Henry; Hector Reyes
  16. New Insight into the Causal Linkage between Economic Expansion, FDI, Coal consumption, Pollutant emissions and Urbanization in South Africa By Udi Joshua; Festus V. Bekun; Samuel A. Sarkodie
  17. FDI in Selected Developing Countries: Evidence from Bundling and Unbundling Governance By Asongu, Simplice
  18. The Role of Asymmetry and Uncertainties in the Capital Flows-Economic Growth Nexus By Raheem, Ibrahim; le Roux, Sara; Asongu, Simplice
  19. Governance and the Capital Flight Trap in Africa By Simplice A. Asongu; Joseph Nnanna
  20. The Effect of Finance on Inequality in Sub-Saharan Africa: Avoidable CO2 emissions Thresholds By Simplice A. Asongu; Xuan V. Vo
  21. Financial Access, Governance and the Persistence of Inequality in Africa: Mechanisms and Policy instruments By Vanessa S. Tchamyou
  22. Financial Access, Governance and Insurance Sector Development in Sub-Saharan Africa By Asongu, Simplice; Odhiambo, Nicholas
  23. Inclusive Education for Inclusive Economic Participation: the Financial Access Channel By Simplice A. Asongu; Joseph Nnanna; Paul N. Acha-Anyi
  24. Finance, Governance and Inclusive Education in Sub-Saharan Africa By Simplice A. Asongu; Nicholas M. Odhiambo
  25. The impact of quality foundational skills on youth employment in Africa: Does institutional quality matter? By Olagunju, Kehinde O.; Ogunniyi, Adebayo; Oguntegbe, Kunle F.; Oyetunde-Usman, Zainab A.; Adenuga, Adewale H.; Andam, Kwaw S.
  26. CEO Incentives and Bank Risk over the Business Cycle By Steven Ongena; Tanseli Savaser; Elif Sisli Ciamarra
  27. Systemic Banking Crises: The Relationship Between Concentration and Interbank Connections. By Andrea Calef
  28. Finance and Innovation in the Production Network By Brancati, Emanuele; Minetti , Raoul; Zhu, Susan Chun
  29. The Economic Effects of COVID-19 and Credit Constraints: Evidence from Italian Firms' Expectations and Plans By Balduzzi, Pierluigi; Brancati, Emanuele; Brianti, Marco; Schiantarelli, Fabio
  30. Factors affecting non-performing loans of commercial banks: The role of bank performance and credit growth By Dao, Kieu Oanh; Nguyen, Thi Yen; Hussain, Sarfraz; Nguyen, V.C.
  31. Financial Sector Transparency and Net Interest Margins: Should the Private or Public Sector lead Financial Sector Transparency? By Baah A. Kusi; Elikplimi K. Agbloyor; Agyapomaa Gyeke-Dako; Simplice A. Asongu
  32. SME Bank Financing, from a European Perspective By Karen van der Wiel; Andrei Dubovik; Fien van Solinge
  33. Do Aggressive Business Growth Strategies Lead to Bank Failure? An Application of the Sustainable Growth Challenge Paradigm to Banking Failures of the Late 2000s Great Recession By Zheng, Maoyong; Escalante, Cesar L.
  34. 米国銀行における中小企業金融の実態 By Tahara, Hiroki; Horiuchi, Daiki; ibn Afaq, Uthman
  35. The Political Economy of the G20 Agenda on Financial Regulation By Ludger Schuknecht; Vincent Siegerink

  1. By: Asongu, Simplice
    Abstract: The purpose of this study is to investigate whether enhancing financial access influences productivity in Sub-Saharan Africa. The research focuses on 25 countries in the region with data for the period 1980-2014. The adopted empirical strategy is the Generalised Method of Moments. The credit channel of financial access is considered and proxied by private domestic credit while four main total factor productivity (TFP) dynamics are adopted for the study, namely: TFP, real TFP, welfare TFP and real welfare TFP. It is apparent from the findings that enhancing financial access positively affects welfare TFP whereas the effect is not significant on TFP, real TFP and welfare TFP. Policy implications are discussed. The study complements the extant literature by engaging hitherto unemployed dynamics of TFP in Sub-Saharan Africa.
    Keywords: Economic Output; Financial Development; Sub-Saharan Africa
    JEL: E23 F21 F30 O16 O55
    Date: 2019–01
  2. By: Otchia, Christian; Asongu, Simplice
    Abstract: This study uses nightlight time data and machine learning techniques to predict industrial development in Africa. The results provide the first evidence on how machine learning techniques and nightlight data can be used to predict economic development in places where subnational data are missing or not precise. Taken together, the research confirms four groups of important determinants of industrial growth: natural resources, agriculture growth, institutions, and manufacturing imports. Our findings indicate that Africa should follow a more multisector approach for development, putting natural resources and agriculture productivity growth at the forefront.
    Keywords: Industrial growth; Machine learning; Africa
    JEL: I32 O15 O40 O55
    Date: 2019–01
  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: Qian Chen; Christoffer Koch; Gary Richardson; Padma Sharma
    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.
    Keywords: Payments crisis; Money and banking; Depository institutions; Bank suspension; Synthetic control; Bayesian inference
    JEL: E51 E52 E58 G18 G21
    Date: 2020–08–18
  5. By: Terhi Jokipii; Reto Nyffeler; Stéphane Riederer
    Abstract: A growing body of literature has highlighted two important caveats to the credit-to-GDP gap as advocated by the Bank for International Settlements (BIS). The first relates to the approach used to normalise credit (i.e., dividing nominal credit by GDP). In this regard, critics have argued that a normalised measure of credit runs the risk of being affected by GDP movements that may or may not be relevant. The second relates to the use of the Hodrick-Prescott (HP) filter to estimate the gap's trend component. In this regard, critics have emphasised several measurement problems associated with using the HP filter. In this paper, we assess the relevance of these critiques for Switzerland. While we find no compelling evidence suggesting a need to deviate from using the BIS gap as a reliable excess credit measure, our findings do emphasise the need to interpret its signal with caution, particularly during long-lasting boom phases and subsequent bust phases. In these situations in particular, authorities should strengthen their decision-making frameworks with additional credit relevant indicators.
    Keywords: BIS gap, credit-to-GDP, macroprudential policy, HP filter
    JEL: E61 E44 E51 G01 G21
    Date: 2020
  6. By: Parui, Pintu
    Abstract: In a stock-flow consistent neo-Kaleckian growth-model, we endogenize the dividend rate and debt-level in the long run and investigate the possibility of multiple equilibria and instability in the economy. We find that the economy is in a wage-led demand and debt-burdened growth regime. However, both debt-led and debt-burdened demand regimes are possible. In some instances, the speed of the adjustment parameter related to the dividend dynamics plays a crucial role in stabilizing the economy. Otherwise, the economy may lose its stability and gives birth to limit cycles. A significant rise in the interest rate may cause instability in the economy.
    Keywords: Capital Accumulation, Dividend Rate, Kaleckian Model, Instability, Limit Cycle
    JEL: C62 E12 O41
    Date: 2020–09–02
  7. By: Szymborska, Hanna Karolina
    Abstract: This paper analyses the impact of household wealth heterogeneity on inequality and macroeconomic stability in financialized economies. Based on the case of the USA since the 1980s it argues that transformation of financial sector operations has generated inequality by influencing gains from wealth ownership and leverage levels across the income distribution. Securitization and the subprime lending expansion have led to the emergence of a new class of leveraged homeowners, experiencing large increases in wealth prior to the Great Recession, followed by substantial losses after the crisis. Simultaneously, capitalists have diversified their asset portfolios while earning the highest and fastest growing wages in the economy when employed as financial sector executives. In this light, the paper proposes a new conceptualization of households in macroeconomic models, defined by balance sheet composition rather than income sources alone. To inform this taxonomy, inequality and leverage indicators are simulated in a stock-flow consistent model calibrated to US data with three classes of households distinguished by their wealth composition, and a securitized financial sector. The proposed framework is found to produce more empirically accurate levels of income inequality and greater macroeconomic instability than the two-class division, and establishes an equalizing effect of housing for wealth distribution.
    Keywords: Household wealth; Inequality; Macroeconomic modelling; Financial system; USA
    Date: 2020–09–21
  8. By: Viral V. Acharya (NYU - Stern School of Business, CEPR and NBER); Raghuram G. Rajan (University of Chicago - Booth School of Business and NBER); Jack B. Shim (NYU - Stern School of Business)
    Abstract: How is a developing country affected by its governmentÕs ability to borrow in international markets? We examine the dynamics of a countryÕs growth, consumption, and sovereign debt, assuming that the governmentÕs objective is to maximize short-term, typically wasteful, expenditures. Sovereign debt can extend the governmentÕs effective horizon; the governmentÕs ability to borrow hinges on its convincing investors they will be repaid, which gives it a stake in the future. The lengthening of the governmentÕs effective horizon can incentivize it to adopt policies that result in higher steady-state household consumption than if it could not borrow. However, access to borrowing does not always improve government behavior. In a developing country that saves little, the government may engage in repressive policies to enhance its debt capacity, which only ensures that successor governments repress as well. This leads to a Ògrowth trapÓ where household steady-state consumption is lower than if the government had no access to debt. We argue that such a model can explain the well-known negative correlation between a developing economyÕs reliance on external financing and its economic growth. We also analyze the effects of instruments such as debt relief, a debt ceiling, and fiscal transfers in helping a developing economy emerge out of a growth trap, even when governed by a myopic, possibly rapacious, government.
    Keywords: Sovereign debt, government myopia, financial repression, allocation puzzle, debt ceiling
    JEL: F3 G28 H2 H3 H6
    Date: 2020
  9. By: Ricardo Molina Díaz; Pablo Cachaga Herrera (Banco Central de Bolivia)
    Abstract: En el último decenio, la inversión pública aumentó notoriamente constituyéndose en un factor importante del crecimiento del producto. En este sentido, el presente documento realiza un análisis del efecto diferenciado de la inversión pública sectorial sobre el PIB para el periodo 1990 al 2016, asumiendo que el efecto de la inversión pública en la actividad económica dependerá del sector donde se destinen los recursos (productivo, infraestructura, social o multisectorial); asimismo, este efecto será diferenciado en el corto y largo plazo. Considerando las características de los datos, se utiliza un panel cointegrado y un modelo de Vector de Corrección de Errores (VEC) para estimar las elasticidades de corto y largo plazo. Los resultados muestran que la inversión en infraestructura tiene mayor efecto en el largo plazo, seguida por la inversión productiva.
    Keywords: Inversión, producción, política fiscal, gasto e inversión
    JEL: E22 E23 E62
    Date: 2018–12
  10. By: Giulia Bettin (Università Politecnica delle Marche and MoFiR); Claudia Pigini (Università Politecnica delle Marche and MoFiR); Alberto Zazzaro (University of Naples Federico II, CSEF and MoFiR.)
    Abstract: We estimate the causal effect 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 and Wealth between 2002 and 2016, we find that financial inclusion is effective in both reducing the likelihood of falling into poverty and helping the poor to improve their economic condition and climb out of poverty. According to our baseline estimates, 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 magnitude of such effects are also confirmed 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 misspecification problems related to omitted factors, such as the level of household indebtedness.
    Keywords: Employment, relationship banking, insurance
    JEL: C23 D14 I32
    Date: 2020–09–10
  11. By: Wu, Benjian; Cui, Yi
    Keywords: Community/Rural/Urban Development, Agricultural Finance, Institutional and Behavioral Economics
    Date: 2020–07
  12. By: Regassa, Mekdim D.; Melesse, Mequanint B.
    Keywords: Agricultural Finance, Risk and Uncertainty, Labor and Human Capital
    Date: 2020–07
  13. By: Chowdhury, Shyamal (University of Sydney); Smits, Joeri (Harvard Kennedy School); Sun, Qigang (Yale University)
    Abstract: Do constraints to technology adoption vary by behavioral traits? We randomize 150 villages in Bangladesh into being offered standard microcredit, loans with a grace period, the choice between those two contracts, and control. No discernible average effects are detected on the adoption of mechanized irrigation, hybrid seeds, and chemical fertilizers. However, credit access enhances technology adoption among present-biased farmers, whose output and profits increase. These effects are driven by the standard contract and choice villages, as present-biased farmers select out of the grace period contract. This suggests offering commitment and screening applicants on present bias to enhance agricultural technology adoption.
    Keywords: microfinance, technology adoption, time inconsistency, Bangladesh
    JEL: O13 O33 Q14 Q16
    Date: 2020–08
  14. By: Philippe Alby (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Emmanuelle Auriol (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Pierre Nguimkeu (Georgia State University - USG - University System of Georgia)
    Abstract: In the absence of a public safety net, wealthy Africans have the social obligation to share their re- sources with their needy relatives in the form of cash transfers and inefficient family hiring. We develop a model of entrepreneurial choice that accounts for this social redistributive constraint. We derive pre- dictions regarding employment choices, productivity, and profitability of firms ran by entrepreneurs of African versus non-African origin. Everything else equal, local firms are over-staffed and less productive than firms owned by nonlocals, which discourages local entrepreneurship. Using data from the manu- facturing sector, we illustrate the theory by structurally estimating the proportion of missing African entrepreneurs. Our estimates, which are suggestive due to the data limitation, vary between 8% and 12.6% of the formal sector workforce. Implications for the role of social protection are discussed.
    Keywords: Entrepreneurship,Family Solidarity,Formal Sector,Africa
    Date: 2020–04
  15. By: Anusha Chari; Peter Blair Henry; Hector Reyes
    Abstract: In 1985, James A. Baker III's “Program for Sustained Growth” proposed a set of economic policy reforms including, inflation stabilization, trade liberalization, greater openness to foreign investment, and privatization, that he believed would lead to faster growth in countries then known as the Third World, but now categorized as emerging and developing economies (EMDEs). A country-specific, time-series assessment of the reform process reveals three clear facts. First, in the 10-year-period after stabilizing high inflation, the average growth rate of real GDP in EMDEs is 2.2 percentage points higher than in the prior ten-year period. Second, the corresponding growth increase for trade liberalization episodes is 2.66 percentage points. Third, in the decade after opening their capital markets to foreign equity investment, the spread between EMDEs average cost of equity capital and that of the US declines by 240 basis points. The impact of privatization is less straightforward to assess, but taken together, the three central facts of reform provide empirical support for the Baker Hypothesis and suggest a simple neoclassical interpretation of the unprecedented increase in growth that has taken place in EMDEs since 1995.
    JEL: E13 E44 F21 F43 F6 F63 O1 O38 O47
    Date: 2020–08
  16. By: Udi Joshua (Federal University Lokoja, Kogi state, Nigeria); Festus V. Bekun (Istanbul Gelisim University, Istanbul, Turkey); Samuel A. Sarkodie (Nord University Business School (HHN), Bodø, Norwa)
    Abstract: This study examines the relationship between foreign direct investment inflows and economic growth by incorporating the role of urbanization, coal consumption and CO2 emissions as additional variables to avoid omitted variable bias. The different order of integration from the unit root test suggested the adoption of a dynamic autoregressive distributed lag bounds testing procedure. The results confirmed the existence of a long-run equilibrium relationship between the outlined series within the period under investigation with a high speed of convergence. The ARDL equilibrium relationship shows that coal consumption is the largest emitter of carbon dioxide emissions in both short- (0.77%) and long- (0.86%) run. Economic growth was found to escalate CO2 emission by approximately 0.27% (in the short-run) and 0.19% (in the long-run). The Granger causality test indicates a non-causal effect between FDI inflow and economic expansion in South Africa, which implies that FDI is not a driver of economic advancement. The empirical study shows a bidirectional causal effect between urbanization and foreign direct investment. This suggests that urban development stimulates foreign direct investment in South Africa. The findings reveal a one-way link from GDP to coal consumption, suggesting economic prosperity promotes coal consumption. The study underscores that economic development and the attraction of more economic investments is in part, dependent on the conservative policy, development of urban centres through infrastructural improvement, and establishing industrial zones.
    Keywords: South Africa; coal consumption; CO2 emissions; climate change; urbanization
    Date: 2020–01
  17. By: Asongu, Simplice
    Abstract: The objective of this study is to assess governance drivers of FDI in a panel of BRICS and MINT countries for the period 2001-2011. We bundle and unbundle governance determinants using a battery of contemporary and non-contemporary estimation techniques. Our findings reveal the following: Firstly, for both contemporary and non-contemporary specifications, while the majority of our governance determinants of Gross FDI are significant, they are overwhelmingly insignificant for Net FDI. Secondly, the significance of the governance dynamics in increasing order of magnitude are general governance, political governance, economic governance, political stability, regulation quality and government effectiveness. Thirdly, for non-contemporary specifications, the significance of governance variables is as follows in ascending order of magnitude: economic governance, institutional governance, general governance, corruption-control, political governance and political stability. The importance of combining governance indicators is captured by the effects of political governance, economic governance and institutional governance. The results indicate that the simultaneous implementation of the various components of governance clarifies a country’s attractiveness for FDI location. Policy implications are discussed with particular emphasis on the timing of FDI and its targeting.
    Keywords: Foreign direct investment, emerging countries, governance
    JEL: C52 F21 F23 P37 P39
    Date: 2019–01
  18. By: Raheem, Ibrahim; le Roux, Sara; Asongu, Simplice
    Abstract: This study examines the asymmetry between capital flows and economic growth in 42 countries for the period 1990-2017. It further argues that uncertainty is an important channel through which asymmetry operates. As such, the three measures of uncertainty are macroeconomic, fiscal and institutional. The Generalised Method of Moments is used as an empirical strategy. The existence of an asymmetry is confirmed by the findings as capital flows are more reactive to economic drag when compared to economic growth. Furthermore, the channels through which asymmetry operate are heterogeneous to measures of capital flows and proxies for uncertainty.
    Keywords: Capital flows, Economic growth, Asymmetry, Uncertainty and Emerging countries
    JEL: C13 F30 G15 O16
    Date: 2019–08
  19. By: Simplice A. Asongu (Yaounde, Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria)
    Abstract: The study examines the use of governance tools to fight capital flight by reducing the capital flight trap. Two overarching policy syndromes are addressed in the study. It first assesses whether governance is an effective deterrent to the capital flight trap in Africa, before examining what thresholds of government quality are required to fight the capital flight trap in the continent. The following findings are established. Evidence of a capital flight trap is apparent because past values of capital flight have a positive effect on future values of capital flight. The net effects from interactions of the capital flight trap with political stability, regulation quality, economic governance and corruption-control on capital flight are positive. The critical masses at which “voice & accountability†and regulation quality can complement the capital flight trap to reduce capital flight are respectively, 0.120 and 0.680, which correspond to the best performing countries. Policy implications are discussed.
    Keywords: governance; capital flight; capital flight trap; Africa
    JEL: C50 E62 F34 O55 P37
    Date: 2020–01
  20. By: Simplice A. Asongu (Yaounde, Cameroon); Xuan V. Vo (University of Economics Ho Chi Minh City, Vietnam)
    Abstract: There is a glaring concern of income inequality in the light of the post-2015 global development agenda of sustainable development goals (SDGs), especially for countries that are in the south of the Sahara. There are also concerns over the present and future consequences of environmental degradation on development outcomes in sub-Saharan Africa (SSA). This study provides carbon dioxide (CO2) emissions thresholds that should be avoided in the nexus between financial development and income inequality in a panel of 39 countries in SSA over the period 2004-2014. Quantile regressions are used as an empirical strategy. The following findings are established. Financial development unconditionally decreases income inequality with an increasing negative magnitude while the interactions between financial development and CO2 emissions have the opposite effect with an increasing positive magnitude. The underlying nexuses are significant exclusively in the median and top quantiles of the income inequality distribution. CO2 emission thresholds that should not be exceeded in order for financial development to continuously reduce income inequality are 0.222, 0.200 and 0.166 metric tons per capita for the median, 75th quantile and 90th quantile of the income inequality distribution, respectively. Policy implications are discussed with particular relevance to Sustainable Development Goals (SDGs).
    Keywords: Renewable energy; Inequality; Finance; Sub-Saharan Africa; Sustainable development
    JEL: H10 Q20 Q30 O11 O55
    Date: 2020–01
  21. By: Vanessa S. Tchamyou (Yaounde, Cameroon)
    Abstract: The aim of this paper is to investigate policy instruments by which the persistence of inequality is affected through financial development channels in 48 African countries for the period 1996 – 2014. Financial dynamic channels of depth (money supply and liquid liabilities), efficiency (at banking and financial system levels), activity (from banking and financial system perspectives) and stability are used. Political (“voice and accountability†and political stability), economic (government effectiveness and regulation quality) and institutional (rule of law and corruption-control) governance policy instruments are also involved. The empirical evidence is based on the Generalised Method of Moments (GMM). The results show that financial depth and financial stability are the best channels of reducing inequality. Moreover, the relevance of these financial channels is significantly apparent when policy instruments are exclusively governance variables. The comparative relevance of governance dynamics in the persistence of inequality is discussed. The study responds to two recent policy and scholarly challenges, notably: the persistence of inequality in Africa and the relevance of governance in addressing income inequality by means of financial access.
    Keywords: Finance; Governance; Inequality; Modelling; Africa
    JEL: O16 O10 I30 C50 O55
    Date: 2020–01
  22. By: Asongu, Simplice; Odhiambo, Nicholas
    Abstract: Purpose –This study investigates the role of financial access in moderating the effect of governance on insurance consumption in 42 Sub-Saharan African countries using data for the period 2004-2014. Design/methodology/approach – Two life insurance indicators are used, notably: life insurance and non-life insurance. Six governance measurements are also used, namely: political stability, “voice & accountability”, government effectiveness, regulation quality, corruption-control and the rule of law. The empirical evidence is based on the Generalised Method of Moments (GMM) and Least Squares Dummy Variable Corrected (LSDVC) estimators. Findings –Estimations from the LSDVC are not significant while the following main findings are established from the GMM. First, financial access promotes life insurance through channels of political stability, “voice & accountability”, government effectiveness, the rule of law and corruption-control. Second, financial access also stimulates non-life insurance via governance mechanisms of political stability, “voice & accountability”, government effectiveness, regulation quality, the rule of law and corruption-control. Originality/value – This research complements the sparse literature on insurance promotion in Africa by engaging the hitherto unexplored role of financial access through governance channels.
    Keywords: Insurance; Finance; Governance; Sub-Saharan Africa
    JEL: G20 I28 I30 O16 O55
    Date: 2019–01
  23. By: Simplice A. Asongu (Yaounde, Cameroon); Joseph Nnanna (The Development Bank of Nigeria, Abuja, Nigeria); Paul N. Acha-Anyi (Walter Sisulu University, South Africa)
    Abstract: Purpose – The study assesses how inclusive education affects inclusive economic participation through the financial access channel. Design/methodology/approach – The focus is on 42 sub-Saharan African countries with data for the period 2004-2014. The empirical evidence is based on the Generalised Method of Moments. Findings – The following findings are established. First, inclusive secondary education moderates financial access to exert a positive net effect on female labour force participation. Second, inclusive “primary and secondary school education†and inclusive tertiary education modulate financial access for a negative net effect on female unemployment. Third, inclusive secondary education and inclusive tertiary education both moderate financial access for an overall positive net effect on female employment. In order to provide more gender macroeconomic management policy options, inclusive education thresholds for complementary policies are provided and discussed. Originality/value – Policy implications are discussed in the light of challenges of economic development in the sub-region and Sustainable Development Goals.
    Keywords: Africa; Gender; Inclusive development
    JEL: G20 I10 I32 O40 O55
    Date: 2020–01
  24. By: Simplice A. Asongu (Yaounde, Cameroon); Nicholas M. Odhiambo (Pretoria, South Africa)
    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
    JEL: I28 I30 G20 O16 O55
    Date: 2020–01
  25. By: Olagunju, Kehinde O.; Ogunniyi, Adebayo; Oguntegbe, Kunle F.; Oyetunde-Usman, Zainab A.; Adenuga, Adewale H.; Andam, Kwaw S.
    Abstract: Despite impressive progress in the economic performance of many African countries in recent years, youth unemployment remains one of the continent’s main socioeconomic and political problems. This study employs panel data covering 49 African countries for the period 2000–2017 to provide the first attempt to explicitly examine the dynamic relationship between quality foundational skills, measured by basic education quality (teacher-pupil ratio), and youth unemployment, while considering the conditional role of institutional capacity, measured by control of corruption, regulatory quality, and financial development. The empirical estimation in this paper is based on a two-step system generalized method of moments (SGMM), in order to control for unobserved heterogeneity and potential endogeneity of all the explanatory variables. The following are the main findings: First, youth unemployment is persistent in Africa. Second, quality of basic education exerts a negative impact on youth unemployment. Third, greater control of corruption, improved regulatory quality, and better structured financial sectors strengthen the effect of quality basic education in reducing youth unemployment. These findings provide a clear policy pathway for reducting youth unemployment. In particular, we recommend that better quality basic education, a well-structured financial structure, and institutional quality should constitute a fundamental component of the policy mix to reduce youth unemployment in Africa.
    Keywords: AFRICA; AFRICA SOUTH OF SAHARA; CENTRAL AFRICA; EAST AFRICA; NORTH AFRICA; SOUTHERN AFRICA; WEST AFRICA; youth; youth employment; employment; education; basic education; skills; gender; institutions; job creation
    Date: 2020
  26. By: Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; Centre for Economic Policy Research (CEPR)); Tanseli Savaser (Vassar College - Department of Economics); Elif Sisli Ciamarra (Stonehill College)
    Abstract: We examine whether the relationship between managerial risk-taking incentives and bank risk is sensitive to the underlying macroeconomic conditions. We find that risk-taking incentives provided to bank executives are associated with higher bank riskiness during economic downturns. We attribute this finding to the increase in moral hazard during macroeconomic downturns when the perceived probability of future bailouts and government guarantees rises. This association is particularly strong for larger banks, banks that maintain lower capital ratios and banks that are managed by more powerful CEOs. Our findings highlight the importance of the interaction between managerial incentives and the macroeconomic environment. Boards and regulators may find it useful to consider the countercyclical nature of the relationship between risk-taking incentives and bank riskiness when designing managerial compensation.
    Keywords: bank risk; executive compensation; equity-based compensation; macroeconomy
    JEL: G01 G2 G3 M52
    Date: 2020–09
  27. By: Andrea Calef (University of East Anglia)
    Abstract: In this paper I study the extent to which the nexus between concentration and interbank linkages affects financial stability, using data for a sample of 19,689 banks in 69 countries from 1995 to 2014. I find that high levels of interbank exposures decrease the probability of observing a systemic banking crisis, when the banking system is either highly concentrated or fragmented. The relationship between concentration and stability is found to be non-monotonic, as predicted by Martinez-Miera & Repullo (2010), although not U-shaped.
    Keywords: banking crisis, systemic risk, market structure; interbank linkages, network, contagion.
    JEL: G01 G21 G28
    Date: 2020–01–15
  28. By: Brancati, Emanuele (University of Rome, La Sapienza); Minetti , Raoul (Michigan State University, Department of Economics); Zhu, Susan Chun (Michigan State University, Department of Economics)
    Abstract: Disruptions of the production network, such as that triggered by the 2020 global crisis, can spill over to firms’ financing and investment processes. This paper studies the role of the production network in the nexus between finance and investment in innovation. Using matched firm-bank data on 25,000 Italian businesses over the 2011-2017 period, we find that firms’ participation in supply chains significantly attenuates the negative effect of bank credit constraints on innovation. A disruption of 25% of the supply chain linkages is predicted to magnify the impact of credit constraints on innovation by about 17%. The support of supply chains to credit constrained innovators reflects not only liquidity pooling in supply chains but also the substitution of liquidity-intensive innovations with transfers of knowledge along R&D-oriented chains. The support fails however to materialize for radical innovations.
    Keywords: Banks; Financial Constraints; Innovation; Supply Chains
    JEL: G21 O30
    Date: 2020–09–08
  29. By: Balduzzi, Pierluigi (Boston College); Brancati, Emanuele (Sapienza University of Rome); Brianti, Marco (Boston College); Schiantarelli, Fabio (Boston College)
    Abstract: We investigate the economic effects of the COVID-19 pandemic and the role played by credit constraints in the transmission mechanism, using a novel survey of expectations and plans of Italian firms, taken just before and after the outbreak. Most firms revise downward their expectations for sales, orders, employment, and investment, while prices are expected to increase at a faster rate, with geographical and sectoral heterogeneity in the size of the effects. Credit constraints amplify the effects on factor demand and sales of the COVID-19 generated shocks. Credit-constrained firms also expect to charge higher prices, relative to unconstrained firms. The search for and availability of liquidity is a key determinant of firms' plans. Finally, both supply and demand shocks play a role in shaping firms' expectations and plans, with supply shocks being slightly more important in the aggregate.
    Keywords: COVID-19, pandemic, firms' expectations, firms' plans, credit constraints, prices, employment, investment, sales, orders
    JEL: E2 E3 G30 I10
    Date: 2020–08
  30. By: Dao, Kieu Oanh; Nguyen, Thi Yen; Hussain, Sarfraz; Nguyen, V.C.
    Abstract: The recent crisis of non-performing loans in the banking system has hit the Vietnamese economy hard. The GDP has been fallen down, while the bad debt ratio in the banking system has risen dramatically to 17.2 percent, and it takes more time to restore the economy and banking system. This research aims to define aspects that impact non-performing commercial bank loans in Vietnam. It covers the period of 2008–2017 using 200 identified banks of Ho Chi Minh City Stock Exchange and Hanoi Stock Exchange, and applies methods based on the regression of pooled ordinary least squares, fixed and random effects models, in particular, generalized least squares to confirm the stability of the regression model. The results show that non-performing loans this year will positively affect those in the next year. In addition, a raise in bank performance and credit growth also leads to the reduction in non-performing loans from banks. Regarding macroeconomic factors, higher interest rates would have a major and beneficial influence on failed loans in terms of macroeconomic dynamics, and, therefore, little effect on economic activity and inflation. Therefore, Vietnamese banking system should reduce the systematic risk and improve monitoring processes, drawing on the experience of global banks with extensive experience in risk management.
    Date: 2020–08–12
  31. By: Baah A. Kusi (University of Ghana Business School, Ghana); Elikplimi K. Agbloyor (University of Ghana Business School, Ghana); Agyapomaa Gyeke-Dako (University of Ghana Business School, Ghana); Simplice A. Asongu (Yaoundé, Cameroon)
    Abstract: This study examines the effect of private and public sector led financial sector transparency on bank interest margins across eighty-six economies. Using a two-step dynamic system generalized method of moments, least square dummy variables, fixed effects and bootstrap quantile panel models between 2005 and 2016, the findings of the two-step GMM are reported as follows. First, results reveal that financial sector transparency whether led by private or public sector reduces interest margins. Second, while no statistical evidence was found on which of the two (private or public sector led transparency) is more effective in dealing with bank interest margins, public sector-led financial transparency is found to be more consistent in reducing bank interest margins across many more economies. Third, the study shows that the effect of financial sector transparency is visible at lower and middle levels of bank interest margins implying that economies with lower and moderately high bank interest margin level can benefit more from policies targeted at improving transparency in the financial sector. These findings imply that the sampled countries must enact policies and laws that deepen and expand financial sector transparency in order to potentially reduce bank interest margins for the good of banking market participants and society at large.
    Keywords: Financial Sector Transparency; Net Interest margins; Private Sector; Public Sector
    Date: 2020–01
  32. By: Karen van der Wiel; Andrei Dubovik; Fien van Solinge
    Abstract: Bank loans continue to be the main source of external financing for small and medium-sized enterprises (SMEs), in both the Netherlands and other European countries. Businesses are using those loans for expansion, innovation or as working capital. But Dutch SMEs are applying for fewer bank loans, and those applications are often rejected by the banks. How does SME bank financing in the Netherlands relate to other European countries, and what are the reasons for the differences?
    Date: 2019
  33. By: Zheng, Maoyong; Escalante, Cesar L.
    Keywords: Agricultural Finance, Risk and Uncertainty, Agribusiness
    Date: 2020–07
  34. By: Tahara, Hiroki (Jan Academy); Horiuchi, Daiki; ibn Afaq, Uthman
    Abstract: 従業員数 20 万人以上の超巨大銀行がある一方で, 地域密着型小銀行が多数を占めるなど, 米国には, 多彩な銀行群が存在する. そうした米国銀行の中小企業向け金融は, そもそも, どのような貸付商品で構成され, 実際にどのように運用されているのか.
    Date: 2019–09–22
  35. By: Ludger Schuknecht; Vincent Siegerink
    Abstract: The paper empirically examines the implementation record of international financial regulation of the banking sector. The study finds that the size of the banking sector and the presence of global systemically important banks (G-SIBs) are positively associated with a stronger implementation record. These results suggest that cooperative motives of internalising externalities, creating a level playing field and preserving financial stability play a role in explaining the implementation record. We find evidence that this cooperative behaviour may be driven by the self-interest of global players as the positive record is particularly strong in countries where large banking sectors and big banks are both present, and where regulation only applies to large players. Sectoral concentration, bank health and the share of foreign ownership yield more mixed results as regards their impact on implementation.
    Keywords: policy coordination, international public goods, financial regulation, rent seeking
    JEL: D70 F55 G15 H26
    Date: 2020

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