nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2021‒07‒26
twenty-six papers chosen by
Georg Man

  1. The S-curve: Understanding the Dynamics of Worldwide Financial Liberalization By Nan Li; Chris Papageorgiou; Tao Zha
  2. Relation Dette – Croissance Économique dans la CEDEAO: Analyse à travers une Approche Non-Linéaire By Kossi M. Agbékponou; Léleng Kebalo
  3. The fuel of unparalleled recovery: Monetary policy in South Africa between 1925 and 1936 By Swanepoel, Christie; Fliers, Philip
  4. Oligopoly Banking, Risky Investment, and Monetary Policy By Altermatt, Lukas; Wang, Zijian
  5. U.S. Monetary Policy Spillovers to Emerging Markets: Both Shocks and Vulnerabilities Matter By Shaghil Ahmed; Ozge Akinci; Albert Queraltó
  6. The Nonlinear Effect of Uncertainty in Portfolio Flows to Mexico By Marco A. Hernández Vega
  7. Foreign Exchange Intervention, Capital Flows, and Liability Dollarization By Paul Castillo; Juan Pablo Medina
  8. A BVAR toolkit to assess macrofinancial risks in Brazil and Mexico By Erik Andres-Escayola; Juan Carlos Berganza; Rodolfo Campos; Luis Molina
  9. Do Fundamentals Explain Differences between Euro Area Sovereign Interest Rates? By Stéphanie Pamies; Nicolas Carnot; Anda Pătărău
  10. Sowing the Seeds of Financial Crises: Endogenous Asset Creation and Adverse Selection By Nicolas Caramp
  11. Capital ratios and banking crises in the European Union By Raphaël Cardot-Martin; Fabien Labondance; Catherine Refait-Alexandre
  12. Un-used Bank Capital Buffers and Credit Supply Shocks at SMEs during the Pandemic By Jose M. Berrospide; Arun Gupta; Matthew P. Seay
  13. Bail-in and Bank Funding Costs By Vittoria Cerasi; Paola Galfrascoli
  14. Hierarchical contagions in the interdependent financial network By William A. Barnett; Xue Wang; Hai-Chuan Xu; Wei-Xing Zhou
  15. Innovation-Driven Entrepreneurship By Tristan L. Botelho; Daniel Fehder; Yael Hochberg
  16. Is Business Formation Driven by Sentiment or Fundamentals? By Kim Kaivanto; Peng Zhang
  17. Africa's female entrepreneurs: Towards funding success By Hanley, Aoife; Görg, Holger; Hornok, Cecília; Ackah, Charles Godfred
  18. Financing Structure, Micro and Small Enterprises’ Performance, and Woman Entrepreneurship in Indonesia By Zeinab Elbeltagy; Zenathan Hasannudin
  19. The Importance of Capital in Closing the Entrepreneurial Gender Gap: A Longitudinal Study of Lottery Wins By Sarah Flèche; Anthony Lepinteur; Nattavudh Powdthavee
  20. Digital technology and productivity of informal enterprises: Empirical evidence from Nigeria By Michael Danquah; Solomon Owusu
  21. Board director reputation capital and financial performance of listed firms in Nigeria By Peter Ehizokhale Okpamen; Sunday Oseiweh Ogbeide
  22. Cross-relationships between microfinance and the banking sector: continuities and discontinuities in credit provision. By Amélie Artis; Kouassi N'Goran
  23. Microfinance: building a new financial institution? By Amélie Artis; Kouassi N’goran
  24. Financial support by MDBs and IFIs to Asia-Pacific region in the time of COVID-19: helpful, but is it sufficient? By Zhenqian Huang; Christopher Cho Shim
  25. Sustainability Bond for the Pacific Feasibility Study By Griffon Emose
  26. Factors Affecting the Environmental and Social Risk Management of Financial Institutions in Selected AsiaPacific Developing Countries By Patrick Martin; Zeinab Elbeltagy; Zenathan Hasannudin; Masato Abe

  1. By: Nan Li; Chris Papageorgiou; Tao Zha
    Abstract: Using a novel database of domestic financial reforms in 90 countries from 1973 to 2014, we document that global financial liberalization followed an S-curve path: reforms were slow and gradual in early periods, accelerated during the 1990s, and slowed down after 2000. We estimate a learning model that explains these dynamics. Policymakers updated their beliefs about the growth effects of financial reforms by learning from their own and other countries' experiences. Positive growth surprises in advanced economies helped accelerate belief updating worldwide, leading to the global wave of financial liberalization in the 1990s. The 2008 financial crisis, however, caused significant belief reversals.
    Keywords: financial reforms; informational diffusion; cross-country learning; belief updating; S-curve evolution; political costs; economic growth; financial crisis
    JEL: O11 O50 C11 C54
    Date: 2021–07–13
  2. By: Kossi M. Agbékponou (Université de Lomé [Togo]); Léleng Kebalo (Université de Lomé [Togo])
    Abstract: In the context of the worrying new rise in central government debt in ECOWAS, this article determines through a non-linear approach, the debt threshold not to be exceeded so that central government debt has a positive effect on economic growth. By adopting Hansen's (1999) approach, the analysis carried out over the period 2007-2016 reveals the existence of a debt threshold estimated at 30.71% of GDP, threshold below which any additional debt has a positive effect on economic growth. Conversely, above 30.71% of GDP, central government debt has a negative effect on economic growth. The threshold estimated in this article corroborates those in the recent literature. Nevertheless, it should not be considered as a static, optimal threshold that could compromise the validity of the budgetary norm in force in the region, which limits the debt to 70% of GDP. The gap between the two thresholds is due to the fact that the estimated threshold is endogenous, i.e. it takes into account the debt behaviour over the period considered in this paper. The article then proposes economic policies for making fiscal policies more effective, for slowing the rise in debt levels, and finally discusses the potential consequences of the rapid increase in debt on the West African regional monetary integration process.
    Abstract: Dans le contexte de la nouvelle montée inquiétante de la dette du gouvernement central dans la CEDEAO, cet article détermine à travers une approche non linéaire, le seuil d'endettement à ne pas excéder de sorte que la dette du gouvernement central ait un effet positif sur la croissance économique. En adoptant l'approche de Hansen (1999), les estimations effectuées sur la période 2007-2016 révèlent l'existence d'un seuil d'endettement estimé à 30,71% du PIB ; seuil en dessous duquel une dette additionnelle a un effet positif sur la croissance économique. En revanche, au-delà de 30,71% du PIB, la dette du gouvernement central a un effet négatif sur la croissance économique. Le seuil estimé dans cet article corrobore ceux de la littérature récente. Néanmoins, il ne doit pas être considéré comme un seuil statique, optimal et pouvant remettre en cause la norme budgétaire en vigueur au sein de la région qui limite la dette à 70% du PIB. L'écart entre les deux seuils est dû au fait que celui estimé est endogène, c'est-à-dire qu'il tient compte du comportement de la dette sur la période d'analyse considérée. L'article propose par la suite des politiques économiques pour rendre plus efficaces les politiques budgétaires, pour ralentir la progression du niveau d'endettement, et discute des conséquences potentielles de la hausse rapide de la dette sur le processus d'intégration monétaire régionale ouest-africaine.
    Keywords: Dette du gouvernement central,Croissance économique,Politique budgétaire,Seuils endogènes,CEDEAO
    Date: 2019–12–30
  3. By: Swanepoel, Christie; Fliers, Philip
    Abstract: The newly established South African Reserve Bank (SARB) was tasked to protect the currency by navigating the interwar gold standard, and, from March 1933, maintaining parity with the Pound Sterling. We find that South Africa's exit from gold secured an unparalleled and rapid recovery from the Great Depression. South Africa's exit was accompanied by an inextricable link of the SARB's policy rate to the interest rate set by the Bank of England (BoE). This sacrifice of independent monetary policy allowed the SARB to fix the country's exchange rate without impeding the flow of gold to London. The SARB fuelled the economy by reducing its policy rates and accumulating gold. Had South Africa not devalued, the country would have suffered a severe depression and persistent deflation. An alternative to the devaluation, was for the SARB to pursue a cheap money strategy. By setting interest rates historically low, we find that South Africa could have achieved higher levels of economic growth, at the cost of higher inflation. Ultimately, South Africa's unparalleled recovery can be ascribed to the devaluation, however the change in the SARB monetary policy and the bank's control over the gold markets were of paramount importance.
    Keywords: monetary policy management,interwar gold standard,South Africa
    JEL: N14 N20 E42 E52 E58 F33
    Date: 2021
  4. By: Altermatt, Lukas; Wang, Zijian
    Abstract: Oligopolistic competition in the banking sector and risk in the real economy are important characteristics of developed economies, but have so far mostly been abstracted from in monetary economics. We build a dynamic general equilibrium model of monetary policy transmission that incorporates both of these features and document that including them leads to important insights in our understanding of the transmission mechanism. Various equilibrium cases can occur, and policies have differing effects in these cases. We calibrate the model to the U.S. economy in 2016-2019 in order to study how changes in the degree of banking competition or the policy rate would have affected equilibrium outcomes. We find that doubling banking competition would have increased welfare by 1.02\%, but at the cost of increasing the probability of bank default from 0.02\% to 0.44\%. We further find that the policy rate was set optimally to minimize the probability of bank default, but that a decrease in the policy rate by 1pp would have increased welfare by 0.40\%. We also show that bank profits are increasing in the policy rate, in particular when interest rates are low. Thus, a 1pp reduction in the policy rate would have reduced profits per bank by 35.5\% in our calibrated economy. Finally, we document that monetary policy pass-through is incomplete under imperfect competition in the banking sector, as a change in the policy rate by 1pp leads to a change of only 0.92pp in the loan rate, while pass-through to the deposit rate is nearly complete for rate increases, but almost zero for rate reductions due to the zero-lower bound.
    Keywords: Oligopoly competition, Risky investment, Monetary policy, Financial intermediation
    Date: 2021–07–13
  5. By: Shaghil Ahmed; Ozge Akinci; Albert Queraltó
    Abstract: Using a macroeconomic model, we explore how sources of shocks and vulnerabilities matter for the transmission of U.S. monetary changes to emerging market economies (EMEs). We utilize a calibrated two-country New Keynesian model with financial frictions, partly-dollarized balance sheets, and imperfectly anchored inflation expectations. Contrary to other recent studies that also emphasize the sources of shocks, our approach allows the quantification of effects on real macroeconomic variables as well, in addition to financial spillovers. Moreover, we model the most relevant vulnerabilities structurally. We show that higher U.S. interest rates arising from stronger U.S. aggregate demand generate modestly positive spillovers to economic activity in EMEs with stronger fundamentals, but can be adverse for vulnerable EMEs. In contrast, U.S. monetary tightenings driven by a more-hawkish policy stance cause a substantial slowdown in activity in all EMEs. Our model also captures the challenging policy tradeos that EME central banks face. We show that these tradeoffs are more favorable when inflation expectations are well anchored.
    Keywords: Financial frictions; U.S. monetary policy spillovers; Adaptive expectations
    JEL: E32 E44 F41
    Date: 2021–07–15
  6. By: Marco A. Hernández Vega
    Abstract: Economic uncertainty is considered not only one of the main causes of recessions, but also a major obstacle to economic recovery. Recent studies find that significantly high levels of uncertainty could have a non-linear impact that amplifies the response of macroeconomic variables. The objective of this document is to analyze the presence of this impact on portfolio flows to Mexico. The results show that episodes of high uncertainty have a greater negative impact on bond and stock flows than those found under a linear VAR. Furthermore, it is observed that the effect is more persistent for bond flows. Finally, high uncertainty leads to a marked depreciation of the nominal exchange rate, a contraction in economic activity and a fall in the stock index.
    JEL: F32 F62 G10
    Date: 2021–07
  7. By: Paul Castillo (Central Bank of Peru); Juan Pablo Medina (Universidad Adolfo Ibanez, Chile)
    Abstract: This paper investigates the relevance of foreign exchange intervention in dealing with the global financial cycle in emerging economies. We show in a VAR analysis that a shock to global capital flows has a sizable effect on economic activity, and this effect is amplified in emerging economies with liability dollarization. However, countries that systematically rely on sterilized foreign exchange intervention display lower output and real exchange rate volatility in response to global capital flows shocks. We then develop a small open economy model with liability dollarization and balance sheets effects calibrated to an emerging economy. The model is consistent with the empirical evidence. Model simulations show that liability dollarization amplifies the effects of the global financial cycle and that foreign exchange intervention can reduce macroeconomic volatility and improve welfare. These results point to the importance of foreign exchange reserves in insulating emerging economies from shocks to global capital flows.
    Keywords: Foreign Exchange Intervention; Global Financial Cycle; Liability Dollarization; Balance Sheet Effects; Emerging Economies
    JEL: E58 F31 F41
    Date: 2021–06–25
  8. By: Erik Andres-Escayola (Banco de España); Juan Carlos Berganza (Banco de España); Rodolfo Campos (Banco de España); Luis Molina (Banco de España)
    Abstract: This paper describes the set of Bayesian vector autoregression (BVAR) models that are being used at Banco de España to project GDP growth rates and to simulate macrofinancial risk scenarios for Brazil and Mexico. The toolkit consists of large benchmark models to produce baseline projections and various smaller satellite models to conduct risk scenarios. We showcase the use of this modelling framework with tailored empirical applications. Given the material importance of Brazil and Mexico to the Spanish economy and banking system, this toolkit contributes to the monitoring of Spain’s international risk exposure.
    Keywords: macroeconomic projections, risk scenarios, Bayesian vector autoregressions
    JEL: C32 C53 F44 F47
    Date: 2021–06
  9. By: Stéphanie Pamies; Nicolas Carnot; Anda Pătărău
    Abstract: This paper explores the determinants of sovereign interest rate spreads of euro area countries (vis-à-vis Germany), using panel regressions with annual data for 2000-2019. It focuses on the role of fundamental factors, namely fiscal, macroeconomic and institutional variables, while considering also some contextual factors such as global risk aversion and controlling for the influence of central banks’ asset purchases. Through extensive testing of various (fiscal) variables, interactions and non-linearities, the analysis confirms that sovereign spreads respond to fundamental variables, especially the government debt, indicating that such response is non-linear. The results also show that structural factors, such as potential growth and the quality of institutions, can largely mitigate the impact from government debt on spreads. Indeed, in countries with the highest potential growth and strongest institutions, the marginal effect of government debt on spreads would be close to zero. From a policy angle, the results are a reminder that, even in an environment of persistently low rates, more solid fundamentals allow governments to benefit from lower borrowing costs and lessrisk exposure. They also highlight that policies aimed at reinforcing potential growth and government effectiveness can be expected to improve investors’ perception of sovereign risk and their forbearance of higher debt.
    JEL: H63 E43 E62 C23 O52
    Date: 2021–06
  10. By: Nicolas Caramp (Department of Economics, University of California Davis)
    Abstract: What sows the seeds of financial crises, and what policies can help avoid them? I model the interaction between the ex-ante production of assets and ex-post adverse selection in financial markets. Positive shocks that increase market prices exacerbate the production of low-quality assets and can increase the likelihood of a financial market collapse. The interest rate and the liquidity premium are endogenous and depend on the functioning of financial markets as well as the total supply of assets (private and public). Optimal policy balances the economy’s liq- uidity needs ex-post with the production incentives ex-ante, and it can be implemented with three instruments: government bonds, asset purchase programs, and transaction taxes. Pub- lic liquidity improves incentives but implies a higher deadweight loss than private market interventions. Optimal policy does not rule out private market collapses but mitigates the fluctuations in the total liquidity.
    JEL: E44 G01 G12 D82
    Date: 2021–07–15
  11. By: Raphaël Cardot-Martin (CRESE EA3190, Univ. Bourgogne Franche-Comté, F-25000 Besançon, France); Fabien Labondance (CRESE EA3190, Univ. Bourgogne Franche-Comté, F-25000 Besançon, France); Catherine Refait-Alexandre (CRESE EA3190, Univ. Bourgogne Franche-Comté, F-25000 Besançon, France)
    Abstract: We assess if capital ratios reduced the occurrence of banking crises in the European Union from 1998 to 2017. We use a Probit model and estimate the effect of two measures: the bank capital to total assets ratio and the bank regulatory capital to Risk Weighted Assets (RWA). We found that both measures affect negatively the probability of crisis. This result is robust to the exclusion of outliers, to the inclusion of various control variables for banking, financial and macroeconomic risks. Finally, we show that while the bank regulatory capital to RWA has always a negative effect on the probability of crisis, the bank capital to total assets ratio is only significant above a threshold, estimated between 10% and 12%.
    Keywords: Unconventional measures, retail interest rate, Heterogeneous panel
    JEL: G21 E44
    Date: 2021–07
  12. By: Jose M. Berrospide; Arun Gupta; Matthew P. Seay
    Abstract: Did banks curb lending to creditworthy small and mid-sized enterprises (SME) during the COVID-19 pandemic? Sitting on top of minimum capital requirements, regulatory capital buffers introduced after the 2008 global financial crisis (GFC) are costly regions of “rainy day†equity capital designed to absorb losses and provide lending capacity in a downturn. Using a novel set of confidential loan level data that includes private SME firms, we show that “buffer-constrained†banks (those entering the pandemic with capital ratios close to this regulatory buffer region) reduced loan commitments to SME firms by an average of 1.4 percent more (quarterly) and were 4 percent more likely to end pre-existing lending relationships during the pandemic as compared to “buffer-unconstrained†banks (those entering the pandemic with capital ratios far from the regulatory capital buffer region). We further find heterogenous effects across firms, as buffer-constrained banks disproportionately curtailed credit to three types of borrowers: (1) private, bank-dependent SME firms, (2) firms whose lending relationships were relatively young, and (3) firms whose pre-pandemic credit lines contractually matured at the start of the pandemic (and thus were up for renegotiation). While the post-2008 period saw the rise of banking system capital to historically high levels, these capital buffers went effectively unused during the pandemic. To the best of our knowledge, our study is the first to: (1) empirically test the usability of these Basel III regulatory buffers in a downturn, and (2) contribute a bank capital-based transmission channel to the literature studying the effects of the pandemic on SME firms.
    Keywords: Financial institutions; Capital regulation; Procyclicality; COVID-19
    JEL: G20 G21 G28
    Date: 2021–07–15
  13. By: Vittoria Cerasi; Paola Galfrascoli
    Abstract: We empirically evaluate the impact of the new resolution policy, the so-called Bank Recovery and Resolution Directive (BRRD) enacted in 2016, on the cost of funding for EU banks. We first measure the change in the spreads of credit default swaps on subordinated and senior bonds issued by EU banks around the period when the policy became effective and provide evidence of a greater increase in the risk premia of more junior bail-in-able bonds than for senior bonds. We then investigate the reasons for the different intensities by which this policy has affected the banks in our sample. We uncover specific characteristics of banks and macroeconomic factors to explain this heterogeneity. Banks with more problematic loans, that are less capitalized, and that are headquartered in countries with a higher risk premium on sovereign debt have experienced a greater rise in the cost of their funds; conversely, larger banks with a greater proportion of domestic over total subsidiaries were less affected. Moreover, we show that the low-interest-rate environment has increased the riskiness of all the banks in our sample. Overall, our paper provides evidence that market discipline has been reinforced by the adoption of the BRRD.
    Keywords: Bank resolution; Credit Default Swaps; Market discipline.
    JEL: G28 G21 G14
    Date: 2021–07
  14. By: William A. Barnett; Xue Wang; Hai-Chuan Xu; Wei-Xing Zhou
    Abstract: We model hierarchical cascades of failures among banks linked through an interdependent network. The interaction among banks include not only direct cross-holding, but also indirect dependency by holding mutual assets outside the banking system. Using data extracted from the European Banking Authority, we present the interdependency network composed of 48 banks and 21 asset classes. Since interbank exposures are not public, we first reconstruct the asset/liability cross-holding network using the aggregated claims. For the robustness, we employ three reconstruction methods, called $\textit{Anan}$, $\textit{Ha\l{}a}$ and $\textit{Maxe}$. Then we combine the external portfolio holdings of each bank to compute the interdependency matrix. The interdependency network is much denser than the direct cross-holding network, showing the complex latent interaction among banks. Finally, we perform macroprudential stress tests for the European banking system, using the adverse scenario in EBA stress test as the initial shock. For different reconstructed networks, we illustrate the hierarchical cascades and show that the failure hierarchies are roughly the same except for a few banks, reflecting the overlapping portfolio holding accounts for the majority of defaults. Understanding the interdependency network and the hierarchy of the cascades should help to improve policy intervention and implement rescue strategy.
    Date: 2021–06
  15. By: Tristan L. Botelho; Daniel Fehder; Yael Hochberg
    Abstract: Entrepreneurship is thought to be a key driver of economic growth. While there are myriad forms of entrepreneurship, ranging from self-employment to small and medium size enterprises to technology- and innovation-driven startups, recent research provides evidence that the relationship between entrepreneurship and economic growth is driven not by overall quantity of new firm entry, but rather by a small subset of high-growth startups that are primarily categorized as innovation-driven. This paper provides a survey of the growing literature on the economics of such innovation-driven entrepreneurship. We begin by distinguishing between the various forms of entrepreneurship, which are often confounded in both theory and empirical work. We lay out the current state of knowledge, and describe the challenges faced by researchers in the field, particularly around measurement, data and identification. We conclude with an overview of the major open questions and directions for future research in the area.
    JEL: O0 O3
    Date: 2021–07
  16. By: Kim Kaivanto; Peng Zhang
    Abstract: The creation of a new business is an act of entrepreneurship. It is also a financial undertaking. Hence it is admissible to apply the apparatus of behavioral finance to study the determinants of business formation. Our results show that aggregate business formation, nationally and regionally, is jointly predicted by economic fundamentals and sentiment. There is evidence of both 'pull' and 'push' motives for entrepreneurship. Yet this simple structure does not survive decomposition by payroll propensity. High-payroll-propensity entrepreneurs respond primarily to pull-motive fundamentals, with sentiment accounting for a small fraction of explained variance. Low-payroll-propensity entrepreneurs, on the other hand, respond to both sentiment and fundamentals, representing both pull- and push-motives, with sentiment accounting for a large fraction of explained variance. Low-payroll-propensity business formation is twice as volatile as high-payroll propensity entrepreneurship, and similarly to noise-based decision making in behavioral finance, it is substantially driven by sentiment.
    Keywords: sentiment, entrepreneurship, business formation, push- and pull-motives, behavioral finance
    JEL: G40 D91 L26 G17
    Date: 2021
  17. By: Hanley, Aoife; Görg, Holger; Hornok, Cecília; Ackah, Charles Godfred
    Abstract: Opportunities for well-paid employment for women are scarce in many African countries. Entrepreneurship is therefore one way in which women can earn a decent livelihood for themselves and their families. Despite the potential opportunities arising from entrepreneurship, the possibilities are often not fully exploited. Female entrepreneurs in the developing world are severely underperforming. In this PEGNet Policy Brief 'Africa's Female Entrepreneurs - Towards Funding Success' by Aoife Hanley, Holger Görg, Cecilia Hornok and Charles Ackah, the authors examine the scale of the gender productivity gap in African countries and how finance constraints underpin this gap.
    Date: 2021
  18. By: Zeinab Elbeltagy (Intern, Macroeconomic and Financing for Development Division, UNESCAP); Zenathan Hasannudin (Macroeconomic Policy and Financing for Development Division, UNESCAP)
    Abstract: Access to finance has been found crucial in influencing firms’ real activities and economic performance.This paper investigates the relationship between the financing structure and firm performance by explor-ing a unique panel dataset of 59,968 Micro and Small Enterprises (MSEs) operating in the manufacturingsector in Indonesia over the 2010-2015 period. We collected a rich set of information about source ofloans to assess the firm performance using yearly total factor productivity (TFP) and labor productivityof each firm. We then examined whether more financing options available to women entrepreneurshipimproves firm performance. Our results show that financial factors are highly decisive to firms’ TFPand labor productivity. The MSEs which have access to external formal financing directly improvesproductivity at the firm level. Moreover, the study finds a significant underperformance of firms ownedby women entrepreneurs compared to those owned by men entrepreneurs. Nevertheless, we found thatwomen entrepreneurs who have access to formal financing improve their firm’s performance. The effectsof finance on productivity are also linked to the firm’s ownership, education, size and age. Our resultsare robust as demonstrated through the use of different approaches. These results provide support forpolicymakers to alleviate credit constraints to enhance productivity of micro and small enterprises andespecially woman entrepreneurship in Indonesia.
    Keywords: Total factor productivity, inclusive financing, woman entrepreneurship
    JEL: G21 J16 L25 L26 N65
    Date: 2020–09
  19. By: Sarah Flèche (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, CEP - LSE - Centre for Economic Performance - LSE - London School of Economics and Political Science); Anthony Lepinteur (Department of Behavioural and Cognitive Sciences); Nattavudh Powdthavee (WBS - Warwick Business School - University of Warwick [Coventry], IZA - Forschungsinstitut zur Zukunft der Arbeit - Institute of Labor Economics)
    Abstract: Would improving women's access to capital reduce the gender entrepreneurial gap? We study this issue by exploiting longitudinal data on lottery winners. Comparing between large to small winners, we find that an increase in lottery win in period t-1 significantly increases the likelihood of becoming self-employed in period t. This windfall effect is statistically the same in magnitude for men and women; the top 25% winners (an average win = £831.16) in year t-1 report a significant increase in the probability of self-employment in year t by approximately 2 percentage points, which is approximately 20-30% of the gender entrepreneurial gap. These results suggest that we can causally reduce the gender entrepreneurial gap by improving women's access to capital that might not be as readily available to the aspiring female entrepreneurs as it is to male entrepreneurs
    Keywords: gender inequality,self-employment,lottery wins,BHPS
    Date: 2021–05
  20. By: Michael Danquah; Solomon Owusu
    Abstract: The lingering policy dilemma facing many governments in sub-Saharan Africa in recent years is what can be done in the short to medium term to boost the output and incomes of individuals and enterprises in the informal sector, given the size and persistence of the sector in the region. In this paper we examine the structural impact of access and usage of digital technology by informal enterprises on labour productivity. Using a sample of non-farm informal enterprises in Nigeria, we employ IV LASSO techniques to carry out our analysis.
    Keywords: Information technology, Informal sector, Productivity, Instrumental variable, Regression analysis, Nigeria
    Date: 2021
  21. By: Peter Ehizokhale Okpamen (Elizade University); Sunday Oseiweh Ogbeide (Ambrose Alli University)
    Abstract: This study examined the impact of board director reputation capital on financial performance of listed firms in Nigeria. The population of the study consists of all the listed non-financial firms in Nigeria. A sample of fifty (50) firms was selected and data were collected over the period 2007 to 2018. Descriptive statistics and system general method of moment estimation methods were used to undertake the data analysis. Findings reveal that board director reputational capital exerted a positive and significant impact on financial performance of the firms. Board size and firm size were negative on firm financial performance in the reference period. The study concludes that board reputational capital is a significant driver of corporate financial performance in Nigeria irrespective of the size of the board. Based on the empirical findings, it is recommended that there is need for regulators to design a framework to efficiently and effectively monitor the reputation of executive board directors and managers in firms. This will assist to check mate agency costs, demonstration of opportunistic behavior capable of destroying the firm value, There is need for firms to encourage adequate interlocking members who have diverse professional training, high social net worth and experience (experience hypothesis) to positively influence effective management and financial performance of listed firms in Nigeria.
    Keywords: board reputational capital,board size,firm size,financial performance,Nigeria
    Date: 2020–12–30
  22. By: Amélie Artis (IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - UGA - Université Grenoble Alpes); Kouassi N'Goran (UMR ART-Dev - Acteurs, Ressources et Territoires dans le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - UPVD - Université de Perpignan Via Domitia - UPVM - Université Paul-Valéry - Montpellier 3 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Microfinance became popular thanks to the success of the Grameen Bank in Bangladesh and the Nobel Peace Prize. Today, this type of finance for the poor is considered a social innovation because of its values, which are in opposition to the dominant financial logic, but also because of its financing methodology, which aims to integrate people who do not have access to credit. In fact, over several decades of practice, microfinance has spread to other economic actors in the financial system (banking institutions, finance companies, fund managers, etc.). Thus, despite the contradictory credit granting logics of its two market actors, microfinance has been able to influence, through its practices, the way traditional finance operates. The mobilization of a recent literature review and a case study allows us to consider that the convergence of their interactions, in a formal political and regulatory context, explains the mission drifts of microfinance described in the literature. In this paper, we attempt to demonstrate the extent to which international donors and academics have fostered the process of microfinance-specific profit-sharing by showing that banks have adopted and adapted many of the practices of microfinance. We shed light on this point by using the case of microfinance in Côte d'Ivoire. This contribution also draws on the sociology of innovation, in particular the model of profit-sharing (Akrich, Callon, Latour, 1988) to describe the process of social innovation in which microfinance takes place. This theoretical model demonstrates that the diffusion of innovation is made possible by the success of its intrinsic qualities. The paper also describes, through the work of Bensebaa and Béji-Bécheur (2007), the process of institutionalization of norms coming from the solidarity economy sector to the conventional capitalist economy. Certain limits linked to the institutionalization process of this social innovation are presented in order to allow an understanding of the criticisms and limits of microfinance.
    Abstract: La microfinance s'est popularisée grâce au succès de la Grameen Bank au Bengladesh et au prix Nobel de la paix. Aujourd'hui cette finance à destination des pauvres est considérée comme une innovation sociale en raison de ses valeurs en opposition avec la logique financière dominante mais aussi du fait de sa méthodologie de financement visant à intégrer des personnes n'ayant pas accès au crédit. En effet, en plusieurs décennies de pratique, la microfinance s'est diffusée vers les autres acteurs économiques du système financier (établissements bancaires, sociétés financières, gestionnaires de fonds, etc.). Ainsi, malgré les logiques d'octroi de crédit contradictoires de ses deux acteurs du marché, la microfinance a su influencer, par ses pratiques, le mode de fonctionnement de la finance classique. La mobilisation d'une revue de littérature récente et d'une étude cas, nous permet de considérer que la convergence de leurs interactions, dans un contexte politique et réglementaire formel, explique les dérives de mission de la microfinance décrites dans la littérature. Dans le cadre de ce papier, nous tentons de démontrer dans quelle mesure les bailleurs internationaux et les académiciens ont favorisé le processus d'intéressement spécifique à la microfinance en montrant que les banques ont repris et adapté plusieurs des pratiques de la microfinance. Nous éclairons ce point en nous appuyant sur le cas de la microfinance en Côte d'Ivoire. Cette contribution mobilise, par ailleurs, la sociologie de l'innovation, en particulier le modèle de l'intéressement (Akrich, Callon, Latour, 1988) pour décrire le processus d'innovation sociale dans lequel s'inscrit la microfinance. Ce modèle théorique démontre que la diffusion de l'innovation est rendue possible grâce au succès de ses qualités intrinsèques. Le document décrit également, à travers les travaux de Bensebaa et Béji-Bécheur (2007) le processus d'institutionnalisation de normes venues du secteur de l'économie solidaire vers celui de l'économie conventionnelle capitaliste. Certaines limites liées au processus d'institutionnalisation de cette innovation sociale sont présentées en vue de permettre la compréhension des critiques et des limites de la microfinance.
    Keywords: Microfinance,Innovation sociale,Développement,Finance solidaire,Institutionnalisation
    Date: 2019–12–12
  23. By: Amélie Artis (IEPG - Sciences Po Grenoble - Institut d'études politiques de Grenoble - UGA - Université Grenoble Alpes); Kouassi N’goran (UMR ART-Dev - Acteurs, Ressources et Territoires dans le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - UPVD - Université de Perpignan Via Domitia - UPVM - Université Paul-Valéry - Montpellier 3 - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This article examines the institutionalization process of microfinance in its ability to diffuse its rules and visions into the financial and banking sector as well as into development policies. This research presents how the practices, the discourse and the specific ideals of this social innovation diffuse into different sectors with different funding logics. Institutionalist theory allows us to describe the process of of institutionalization of this socio-economic practice with conventional organizations. This article highlights different channels of diffusion to demonstrate that microfinance has become a microfinance has become a financial institution in thirty years.
    Abstract: Cet article examine le processus d'institutionnalisation de la microfinance dans sa capacité à diffuser ses règles et ses visions tant dans le secteur financier et bancaire que dans les politiques de développement. Cette recherche présente comment les pratiques, le discours tenu et les idéaux spécifiques de cette innovation sociale se diffusent dans différents secteurs aux logiques de financement différentes. La théorie institutionnaliste nous permet de décrire le processus d'institutionnalisation de cette pratique socioéconomique auprès d'organismes conventionnels. Différents canaux de diffusion sont mis en exergue, dans le cadre cet article, pour démontrer que la microfinance est devenue en trente ans une institution financière.
    Keywords: Microfinance,Institution,Institutionnalisation,Développement Microfinance,Développement
    Date: 2019–12–05
  24. By: Zhenqian Huang (Macroeconomic Policy and Financing for Development Division, United Nations Economic and Social Commission for Asia and the Pacific); Christopher Cho Shim (Intern, Macroeconomic Policy and Financing for Development Division, United Nations Economic and Social Commission for Asia and the Pacific)
    Abstract: To cope with the socio-economic impact of COVID-19, countries have sought help from multilateral development banks (MDBs) and international financial institutions (IFIs). As of end-September 2020, MDBs and IFIs have committed close to $40 billion worth of financing for Asia-Pacific countries. Over half of the amount is committed by such institutions from the region. This financial support initially focused on enhancing the capacity of public health systems and then gradually shifted to fostering economic recovery. However, MDBs and IFIs’ financial support remains insufficient. Lending to cope with COVID-19 falls short of that during the Global Financial Crisis of 2008. Built-in austerity conditions of the loans could reverse the hard-earned recovery gains and impair sustainable development prospects. Actions will be needed to strengthen MDBs/IFIs’ financing capacity, stop or reduce built-in fiscal austerity, and enhance countries’ spending to recover and build long-term sustainability and resilience.
    Date: 2020–12
  25. By: Griffon Emose (Managing Director of Kontiki Capital Ltd (KCL))
    Abstract: Small Island Developing States (SIDS) are vulnerable to the effects of climate change, environmental damage, and other social challenges. However, their public finances unlikely cover necessary expense for sustainable development and the gap tends to increase given the aftermath of COVID-19 pandemic. This report highlights a potential for sustainability bonds in Pacific SIDS (PSIDS) to fill in the financing gap, by leveraging private sector participation to finance climate resilient investment in the PSIDS. Aside from the bonds issuance itself, the paper provides three general recommendations as follows: (1) a blended finance structure is beneficial given the underdeveloped capital market and small pool of public and private funding; (2) to achieve a desirable target in bond issuance, a private placement could be pursued by direct negotiation with targeted financial institutions, while public offering can be issued through underwritten offerings, best effort offerings, and auctions; (3) country that are willing to issue the sustainability bonds should details their bond framework, in addition to the terms sheet and conditions to binding the bond in financing sustainable projects. The paper concludes that both sovereign and corporate issuance of sustainability bonds are feasible in PSIDS, which is well supported by two case: Fiji Sovereign Green Bond and Seychelles Blue Bond.
    Keywords: : Climate Finance, Environmental and Social Risk, Financial Institutions
    JEL: F65 G20
    Date: 2021–04
  26. By: Patrick Martin (Environmental law specialist and Consultan, Macroeconomic and Financing for Development Division, UNESCAP); Zeinab Elbeltagy (Consultant, Macroeconomic and Financing for Development Division, UNESCAP); Zenathan Hasannudin; Masato Abe (Macroeconomic Policy and Financing for Development Division, UNESCAP)
    Abstract: Considering the significant effect financial institutions (FIs) have on society and the environment, they have a crucial role in achieving the Sustainable Development Goals (SDG) and addressing climate change concerns. Not surprisingly, there is a growing interest in how FIs manage the environmental and social (E&S) risks emanating from their activities. While studying the ‘Innovative Climate Finance Mechanisms for Financial Institutions’, we conducted a survey to investigate the factors affecting FIs’ E&S performance in 11 countries in the Asia-Pacific region. This paper outlines the survey findings and provides insights into the factors affecting E&S performance of FIs. The paper identifies that awareness of E&S risks in the region is growing but from a low base and that E&S risks are increasingly integrated into risk management analysis and reporting frameworks. The paper demonstrates that although some FIs have made significant progress, considerable variation still exists among countries and institutions, and considerable work is still needed to improve E&S performance of FIs in the region. The paper highlights that although policy reforms and engagement can, over time, influence E&S performance of FIs, a lack of management support and institutional capacity remain significant constraints. The paper can assist policymakers in understanding the factors affecting E&S performance of FIs and in distilling the policy options needed to help them better integrate E&S risks into their operations
    Keywords: Financial institutions, Climate Finance, Environmental and Social Risk paper
    JEL: F65 G23
    Date: 2021–03

This nep-fdg issue is ©2021 by Georg Man. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.