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on Financial Development and Growth |
| By: | Suarez, Javier |
| Keywords: | growth-at-risk, macroprudential policy, policy stance, quantile regressions |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:srk:srkops:20210&r= |
| By: | Chrysanthopoulou, Xakousti |
| Abstract: | This paper extends the standard New Keynesian model to allow for the presence of large banks, when the cost channel of monetary policy matters. It is shown that once the presence of large banks is taken into account the severity of the firms’ credit constraints, the aggressiveness of the central bank in stabilizing inflation and the degree of loan setting centralization jointly affect the steady state output. Moreover, it turns out that the indeterminacy region is not only shrunk due to the presence of a finite number of large banks but also dependent – among others - on the way in which the central bank and the macroprudential authority systematically behave. |
| Keywords: | Large banks; Cost channel; Indeterminacy; Countercyclical capital buffer |
| JEL: | E32 E44 E52 |
| Date: | 2021–08–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109275&r= |
| By: | Eyno Rots (Magyar Nemzeti Bank (Central Bank of Hungary)); Barnabas Szekely (Goethe University) |
| Abstract: | We develop a DSGE model to analyze a macroprudential policy framework. We use it to describe the Hungarian economy and the key regulatory constraints implemented there: the loan-to-value and the debt-service-to-income caps imposed on mortgage borrowers and the minimum capital requirement imposed on banks. Our model is novel in the way it treats the borrowing caps as soft constraints, which makes it easy to analyze multiple non-redundant borrowing constraints. We also show an estimation strategy that involves a variation of impulse-response matching and accounts for the lack of historical data concerning the conduct of macroprudential policy, a common problem. |
| Keywords: | DSGE, macroprudential, DSTI, LTV, capital requirement, Covid†19. |
| JEL: | E37 E44 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:mnb:wpaper:2021/3&r= |
| By: | Schnabl, Gunther; Sepp, Tim |
| Abstract: | Das Papier untersucht die Veränderung der Sparkultur in Japan während mehr als 30 Jahren Niedrig-, Null- und Negativzinspolitik basierend auf einer Analyse der Allokationsfunktion von Zinsen und der Transformationsfunktion der Banken bei der Kreditvergabe. Es wird gezeigt, wie durch die anhaltend lockere Geldpolitik der Bank von Japan die Sparkultur in Japan grundlegend von einer hohen Haushaltssparquote zu einer sehr niedrigen Haushaltssparquote verändert wurde. Es werden aufbauend auf der theoretischen Literatur zu Sparmotiven Kanäle identifiziert, die das Haushalts- und Unternehmenssparen maßgeblich verändert und damit die Wachstumskräfte des Landes anhaltend geschwächt haben. |
| Keywords: | Japan,Sparen,Sparkultur,Geldpolitik,Haushaltssparen,Unternehmenssparen,Abenomics,Nullzinspolitik |
| JEL: | E21 E43 E52 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:leiwps:174&r= |
| By: | Giovanni Pellegrino (Aarhus University); Efrem Castelnuovo (University of Padova); Giovanni Caggiano (Monash University and University of Padova) |
| Abstract: | We employ a nonlinear VAR framework and a state-of-the-art identification strategy to document the large response of real activity to a financial uncertainty shock during and in the aftermath of the great recession. We replicate this evidence with an estimated DSGE framework featuring a concept of uncertainty comparable to that in our VAR. We then use the estimated framework to quantify the output loss due to the large uncertainty shock that materialized in 2008Q3. We find such a shock to be able to explain about 60% of the output loss in the 2008-2014 period. The same estimated model unveils the role successfully played by the Federal Reserve in limiting the output loss that would otherwise have occurred had monetary policy been conducted as in normal times. Finally, we show that the rule estimated during the great recession is able to deliver an economic outcome closer to the flexible price one than the rule describing the Federal Reserve's conduct in normal times. |
| Keywords: | Uncertainty shock, nonlinear IVAR, nonlinear DSGE framework, minimum-distance estimation, great recession |
| JEL: | C22 E32 E52 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:pad:wpaper:0270&r= |
| By: | Klug, Thorsten; Mayer, Eric; Schuler, Tobias |
| Abstract: | We investigate, in the case of Germany, the positive correlation between the cyclical components of the corporate saving glut in the non-financial corporate sector and the current account surplus from a capital account perspective. Employing sign restrictions, our findings suggest that mostly labor supply, world demand and financial friction shocks account for the joint dynamics of excess corporate saving and the current account surplus. Household saving shocks, by contrast, cannot explain the correlation. We conclude that, explained through these factors, the corporate saving glut is an important driver of the cyclical component of the current account. JEL Classification: E32, F32, F45 |
| Keywords: | corporate saving, current account, macro shocks |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20212586&r= |
| By: | Suah, Jing Lian |
| Abstract: | This paper offers two points on the impact of uncertainty and exchange rate shocks on output. (1) A conceptual model where behavioural frictions --- rational inattentiveness and bounded expectations --- interact with uncertainty, generating aggregate fluctuations. Central banks can target these behaviourial frictions to stabilise output and prices. (2) Empirical findings from a panel of advanced and emerging economies. Output and inflation slow in response to uncertainty shocks. Government bond yields moderate and exchange rates depreciate, suggesting within-country and between-country flight-to-safety respectively. Exchange rate appreciation shocks generate similar responses. The Malaysia-specific analysis finds divergent responses in employment and output, likely reflecting compositional effects in more productive tradable and less productive non-tradable sectors. In a panel fixed effects and quantile regression setting, I find indicative interaction between output, exchange rate and uncertainty, and a distributional dimension. |
| Keywords: | Uncertainty, Rational Inattention, Bounded Rationality, VAR |
| JEL: | E00 E03 |
| Date: | 2020–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109087&r= |
| By: | Judit Temesvary; Andrew Wei |
| Abstract: | We study how U.S. banks' exposure to the economic fallout due to governments' response to Covid-19 in foreign countries has affected their credit provision to borrowers in the United States. We combine a rarely accessed dataset on U.S. banks' cross-border exposure to borrowers in foreign countries with the most detailed regulatory ("credit registry") data that is available on their U.S.-based lending. We compare the change in the U.S. lending of banks that are more vs. less exposed to the pandemic abroad, during and after the onset of Covid-19 in 2020. We document strong spillover effects: U.S. banks with higher foreign exposures in badly "Covid-19-hit" regions cut their lending in the United States substantially more. This effect is particularly strong for longer-maturity loans and term loans and is robust to controlling for firms’ pandemic exposure. |
| Keywords: | Cross-border exposure; Bank lending; Bank capital; Bank balance sheet liquidity |
| JEL: | F34 F65 G15 G21 |
| Date: | 2021–08–24 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2021-56&r= |
| By: | Greg Philip Hannsgen; Tai Young-Taft |
| Abstract: | We develop a pair of models to show how non-ad-hoc shifts to expectational variables can be used to model tendencies toward crisis. In the Shackle model, as developed in the book Keynesian Kaleidics (1974), uncertainty can lead to a collapse in the marginal efficiency of investment and a jump in liquidity preference. In the Minsky version of the model, excessive private debt can lead to a financial collapse–again an endogenous breakdown in forces supporting growth. We extend the models to indicate how the dynamics of inflation and distribution affect the dynamics. |
| Keywords: | Post Keynesian macro model, Poisson model of financial fragility, Keynesian dynamics, Hyman Minsky, G.L.S. Shackle, Keynesian Kaleidics, endogenous MEI and liquidity preference, financial fragility hypothesis |
| JEL: | E12 E32 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2112&r= |
| By: | Lucas Hafemann (Justus-Liebig-University Giessen); Peter Tillmann (Justus-Liebig-University Giessen) |
| Abstract: | The Fed's Senior Loan Officer Opinion Survey (SLOOS) is widely considered a good indicator of banks' lending conditions. We use the change in corporate bond spreads on SLOOS release days to instrument changes in lending standards. A series of estimated IV local projections shows that lending standards have highly significant effects on macroeconomic and financial variables. A relaxation of standards expands economic activity and eases financial conditions. We then use the change in spreads and the change in the VIX index on release days to identify a pure credit supply shock and a risk-taking shock using sign restrictions in a Bayesian VAR model. We find that an easing in lending has different consequences for both types of shocks. While the VIX, the excess bond premium and stock prices decrease after a pure credit supply shock, they increase after a risk-taking shock. |
| Keywords: | loan survey, credit supply, risk-taking, instrumental variable local projections, shock identification |
| JEL: | E32 E44 G14 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:202131&r= |
| By: | Palma Filep-Mosberger (Magyar Nemzeti Bank (Central Bank of Hungary)); Attila Lindner (University College London, MTA KTI); Judit Rariga (Magyar Nemzeti Bank (Central Bank of Hungary)) |
| Abstract: | In this paper, we study firm-bank relationship formation. Combining domestic inter-firm network data from value-added tax declarations and credit registry for Hungary, we estimate the spillover effects in bank choice, identifying from variation on the bank level. Having at least one peer in the network who has an existing loan with a bank increases the probability that the firm will borrow a new loan from the same bank. We provide suggestive evidence that the estimated spillover effect is due to firm-to-firm information transmission about banks. According to our results, firms can learn about banking practices from their peers but they also point to financial stability concerns in the event of shocks to domestic supply chains. |
| Keywords: | bank choice, firm network, spillover effects. |
| JEL: | G30 L14 D22 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:mnb:wpaper:2021/1&r= |
| By: | Song Ma; Justin Murfin; Ryan D. Pratt |
| Abstract: | Across a broad range of equipment types and industries, we document a pattern of local capital reallocation from older firms to younger firms. Start-ups purchase a disproportionate share of old physical capital previously owned by more mature firms. The evidence is consistent with financial constraints driving differential demand for vintage capital. The local supply of used capital influences start-up entry, job creation, investment choices, and growth, particularly when capital is immobile. Conversely, incumbents accelerate capital replacement in the presence of more young firms. The evidence suggests previously undocumented benefits to co-location between old and young firms. |
| JEL: | G3 L2 R1 R4 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29189&r= |
| By: | Valerie Vandermeulen; Werner Roeger |
| Abstract: | In the aftermath of the financial crisis, it had become clear the Euro Area was suffering from insufficient investment. Actual capital stock was below benchmark capital, the amount of capital you need to support trend labour and total factor productivity (TFP) growth rates. The current COVID-19 pandemic might enlarge the gap between benchmark and actual capital, since both the private and public sector are facing limitations to invest. In the current paper, benchmark capital is estimated based on trend supply side conditions and trend in capital and goods market frictions, to investigate whether such a gap exists in the Euro Area and the US and how it has evolved over time. The paper is based on the European Commission’s production function method and uses trend labour supply and TFP as basis for trend supply side conditions. The first order condition of the Cobb-Douglas production function are used to calculate goods market and capital market frictions. Capital costs are estimated using world interest rate as a rental price of capital, adjusted for depreciation, taxes and relative investment prices. In the past, benchmark capital was driven by strong growth in supply side factors, but since trend labour and TFP growth rates have declined, capital and goods market frictions are becoming more important in explaining benchmark capital growth. The paper shows that after the 2008 crisis, a gap occurred between benchmark capital and actual capital. As of 2012, the gap started to close, but benchmark capital growth was very low in the Euro Area, much below that of the US. Just before the current 2020 crisis, the capital gap was closed in the Euro Area and was positive in the US, but it is expected that actual capital growth might stop again due to the limitations to private and public investment. |
| JEL: | D1 D2 D3 E6 H2 H21 J08 J2 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:euf:dispap:145&r= |
| By: | Dong, Qi |
| Keywords: | Agricultural Finance, Research Methods/Statistical Methods, Production Economics |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea21:312627&r= |
| By: | A. Arrighetti; F. Landini |
| Abstract: | The stagnation of investments and its causes have attracted great attention in the recent economic debate. In this paper we show that the flattening of the capital formation rate at the firm level is not due to lower average propensity to invest. Rather, it is the result of growing heterogeneity of choices among firms. While a subset of firms is oriented towards increasing investments, another group substantially divest. The result is a polarization of conducts that tend to cancel each other out, resulting in a flattening of aggregate investment. We argue that this asymmetry in firm’s decisions depends on two main factors. The first one is the diversity of corporate strategies, which firms have developed in the past. The second driver is managerial discretion, that play an important role in the adoption of specific investment / divestment trajectories when faced with a recession. The results of our empirical analysis provide strong supports for our hypotheses: after controlling for contextual and firm-specific structural, financial and demographic variables, corporate strategies and managerial discretion in the allocation of liquid assets explain large part of the heterogeneity in investment decisions during the recession. Policy implications are discussed. |
| Keywords: | Fixed investments; Capital formation; Corporate strategies; Resorce based view; Firms heterogeneity; Managerial discretion; Great Recession; Manufacturing; Italy |
| JEL: | D22 D25 L22 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:par:dipeco:2021-ep01&r= |
| By: | Kuusi, Tero; Ali-Yrkkö, Jyrki |
| Abstract: | Abstract In this paper, we study the impacts of bilateral investment treaties (BITs) between the EU countries and China on EU home investments. We consider BITs as “treatments” that provide further access to global value chains (GVCs). We identify the causal impacts of the BITs on the relationship between home investments and the deepening of GVCs, with identification arising from exogenous, pre-treaty variation in the exposure to the Chinese value chains. We show that strong pre-treaty exposure to the Chinese value chains has led to a further strengthening of the Chinese upstream linkages and a decreasing impact on domestic capital growth in the EU. it seems that the effects of the BITs are strongly felt in growing industries where there have been high capital growth rates, most pronouncedly in the manufacture of computer, electronic, and optical products, and pharmaceuticals. On the other hand, it is also felt in some industries that have had laggard capital growth rates, such as the textile industry. However, it appears that the effect has been heterogeneous, concentrating on countries with low productivity, as relative to the global industry averages. Among the exposed industries with a high pre-treaty fraction of Chinese production, the high-productivity ones tend to increase their relative labor-productivity growth and value-added growth more after the signing of a treaty. The negative link between non-Chinese investments and the pre-treaty exposure also characterizes BITs with China and non-EU countries, but not BITs without China as a partner country. |
| Keywords: | Domestic investments, Foreign investments, Investment treaty, Overseas investments, Global value chain, Bilateral treaties |
| JEL: | F21 F23 F13 F62 L24 |
| Date: | 2021–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:rif:report:115&r= |
| By: | Idowu, Ayodele; Collins, Tomisin |
| Abstract: | The study investigates the influence of manufacturing sector performance and disaggregated government expenditure on economic performance in Nigeria. Government expenditure is disaggregated into social and community services and economic services. The study employed and makes use of time series data from 1981 to 2020. Data on manufacturing sector performance, government expenditure on social, government expenditure on community services and economic services, foreign direct investment, interest rate, population and economic growth were sourced from Central Bank of Nigeria statistical bulletin, World Development Indicators and Nigeria Bureau of Statistics. The Unit root test shows that all variables except foreign direct investment and population are stationary at first difference and the bounds test confirms existence of long run relationship among the variables at 5% significant level. The econometric technique used in estimating the VAR model to run the causality test is the Toda-Yamamoto model while Autoregressive Distributed Lag Model (ARDL) model was the estimation technique used to analyze the main objective of the study to generate short run and long run result. The econometric model estimated reveals that manufacturing sector performance, foreign direct investment, government expenditure on community and social services have a positive and significant impact on economic performance while government expenditure on economic services have a negative and significant impact on economic performance while interest rate does not have a significant impact on economic performance. |
| Keywords: | Manufacturing Sector performance, Government expenditure, Economic growth, Modelling. |
| JEL: | E2 E62 O1 O4 |
| Date: | 2021–08–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109245&r= |
| By: | Scott Régifère Mouandat (Université Omar Bongo [Libreville, Gabon]) |
| Abstract: | Objective: The purpose of this paper is to verify the non-linearity between external debt and economic growth in Gabon. Method: Taking the period 2000-2019, our analysis is based on the Threshold Autoregressive (TAR) model of Hansen (1999). Results: The results show that the debt denominated in US dollars and that denominated in Euros stimulate economic growth in this country when they are respectively lower than the threshold of 52.31% and 34.76% of the GDP and become recessive on the activity beyond these thresholds. Originality/Relevance: The paper analyzes the non-linearity between external debt and economic growth in Gabon by distinguishing specifically between debt denominated in US dollars and in Euros. It then looks at the currency composition of such debt in the context of a small economy open to the outside world. Contribution: The results of the paper show that the government would benefit from favoring US dollar denominated debt as it gives more leeway in the debt strategy. |
| Abstract: | Objectif : L'objet de l'article est de vérifier la non linéarité entre la dette extérieure et la croissance économique au Gabon. Méthode : En prenant la période 2000-2019, notre analyse, s'est appuyée sur le modèle à changement de régime à transition brutale (Threshold Autoregressive, TAR) de Hansen (1999). Résultats : Les résultats montrent que la dette libellée en dollar US et celle libellée en euro stimulent la croissance économique dans ce pays lorsqu'ils sont respectivement inférieurs au seuil de 52,31% et 34,76% du PIB et deviennent récessifs sur l'activité au-delà de ces seuils. Originalité/pertinence : L'article analyse la non-linéarité entre la dette extérieure et la croissance économique au Gabon en distinguant spécifiquement la dette libellée en dollar US et en Euro. Il s'est alors intéressé à la composition en devise d'une telle dette dans le cadre d'une petite économie ouverte sur l'extérieure. Contribution : Les résultats de l'article montrent que le gouvernement gagnerait à privilégier la dette libellée en dollar américain car elle donne plus de marge de manoeuvre dans la stratégie d'endettement. |
| Keywords: | Optimal public debt,foreign currency debt,TAR,exchange rate,public debt management.,Dette optimale,Dette en monnaie étrangère,taux de change,gestion de la dette publique. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03326826&r= |
| By: | Carlos Alberto Piscarreta Pinto Ferreira |
| Abstract: | We assess the investor base impact on government borrowing costs and examine how investors react to shocks in sovereign bond yields, across 24 countries and 3 maturities between 2004Q1-2019Q2. Our VAR approach has the advantage of modelling bidirectional causality between yields and investor base. We find that higher foreign holdings are associated with lower yields but link these effects exclusively to foreign banks and mainly to 10-years maturity. Yields in GIIPS and EA core countries react in opposite directions to foreign holdings shocks. Foreign investment is procyclical, namely at the long end and where fundamentals are weaker. Thus, an EA sovereign debt crisis re-run cannot be dismissed requiring readiness to use supporting mechanisms to prevent contagion and an escalation that may jeopardize the monetary union itself. Yields’ response to domestic investment shocks is heterogeneous and seems to bear no significant relation with home bias. No cyclical trading pattern can be clearly associated to each type of domestic investor. |
| Keywords: | Public Debt, Government Bonds, Debt Structure, Investor Base, Sovereign Risk, VAR |
| JEL: | C32 C33 E43 G12 F34 G11 G12 H63 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp01902021&r= |
| By: | Azizjon Alimov (IESEG School of Management, UMR 9221 - LEM - Lille Economie Management, F-59000 Lille, France) |
| Abstract: | This paper examines how variation in the supply of government debt affects corporate acquisition activity. Using data from 50 countries from 1991 to 2017, the paper finds that government debt issuance is strongly negatively associated with acquisition activity at the firm and aggregate levels. In response to increases in government borrowing, firms appear to make better quality deals. Importantly, these effects are stronger for cash-financed deals and for more creditworthy firms whose debt is closer substitute for government bonds. Collectively, these findings suggest that rising government debt leads to “real crowding out” by affecting firm ability to make large investments. |
| Keywords: | government debt, mergers and acquisitions |
| JEL: | E62 G34 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:ies:wpaper:f202104&r= |
| By: | Gnangnon, Sèna Kimm; Iyer, Harish |
| Abstract: | Development aid and non-reciprocal trade preferences (NRTPs) are two major tools available to wealthier nations to assist developing countries in their development efforts. The present paper investigates the effect of Aid for Trade (AfT) flows (that are key for the integration of developing countries into the global trading system) and foreign direct investment (FDI) inflows, as well as their interplay on the utilization of NRTPs offered by the Quadrilaterals (i.e., QUAD countries). Two major blocks of NRTPs provided by the QUAD countries have been considered, namely the Generalized System of Preferences (GSP) programs and other NRTPs. The analysis has covered 114 beneficiary countries of these NRTPs (of which 38 Least developed countries - LDCs) and the period 2002-2018. Several findings have emerged from the analysis. Over the full sample, total AfT flows contribute to enhancing the utilization rate of both GSP programs and other NRTPs. FDI inflows influence positively the utilization rate of both GSP programs and other NRTPs, with the effect on the former being higher than the effect on the latter. For LDCs, total AfT flows are associated with a better utilization of GSP programs at the expense of other NRTPs, while for NonLDCs, total AfT flows generate a better utilization of GSP programs compared to other NRTPs. In the meantime, higher FDI inflows improve the utilization of the two types of NRTPs, although they exert a higher positive effect on the utilization of GSP programs than on that of other NRTPs. In NonLDCs, higher FDI inflows contribute to improving the utilization of GSP programs, but lead to a lower degree of usage of other NRTPs. Total AfT flows and FDI inflows are strongly complementary in affecting positively the utilization of both types of NRTPs, and the degree of this complementarity is higher on the utilization of other NRTPs than on the utilization of GSP programs. Finally, beneficiary countries' level of export product diversification matters for the effect of both AfT flows and FDI inflows on the utilization of NRTPs. The conclusion section discusses the implications of these findings. |
| Keywords: | Aid for Trade,Foreign Direct Investment Inflows,Non-reciprocal trade preferences utilization,QUAD countries,Developing Countries |
| JEL: | F13 F14 F13 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:esprep:238211&r= |
| By: | Ionut Cotoc; Alok Johri; César Sosa-Padilla |
| Abstract: | Using data from 56 nations over 45 years, we find that nations that are more likely to elect left wing governments face higher (and more volatile) sovereign spreads. To explain these facts, we build a sovereign default model in which two policymakers (left and right) alternate in power. The probability of an incumbent staying in power is increasing in the share of government spending. We parametrize the left policymaker as having a higher marginal political gain from increasing government spending than the right does, a feature found in our data. Model economies in which the left is more frequently in power face worse borrowing terms due to higher default risk, a greater reluctance for fiscal austerity in bad times, and a higher share of government spending on average. These features imply large welfare losses for households. |
| JEL: | F34 F41 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29197&r= |
| By: | van Buggenum, Hugo (Tilburg University, School of Economics and Management) |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiutis:f6e8dc53-9a1b-4f66-9cef-b1efb22ac76c&r= |
| By: | Robert Clark; Jean-François Houde; Jakub Kastl |
| Abstract: | This chapter discusses recent developments in the literature involving applications of industrial organization methods to finance. We structure our discussion around a simple model of a financial intermediary that concentrates its attention either on (i) the retail market and hence engages in a traditional maturity transformation business by accepting funds that can be used to invest in risky projects (loans), or (ii) the investment business, financing its operations on the “wholesale” market and making markets or investing in higher return riskier projects. Our discussion is centered around the analysis of market structure and competition in each of these markets, focusing in turn on (i) primary and secondary markets for government and corporate debt, (ii) interbank loans, (iii) markets for retail funding, and (iv) credit markets, including mortgages. |
| JEL: | G2 L1 L51 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29183&r= |
| By: | Pierlauro Lopez |
| Abstract: | More than 20 years of financial market data suggest a term structure of the welfare cost of economic uncertainty that is downward-sloping on average, especially during downturns. This evidence offers guidance in selecting a model to study the benefits of macroeconomic stabilization from a structural perspective. The addition of nonlinear external habit formation to a textbook monetary model can rationalize the evidence. The model is observationally equivalent in its quantity implications to a standard New Keynesian model with CRRA utility, but the optimal policy prescription is overturned. In the model the central bank should prioritize removing consumption volatility (a targeting of risk premia) over filling the gap between consumption and its flexible-price counterpart (inflation targeting). |
| Keywords: | Welfare cost of business cycles; Macroeconomic priorities; Equity and bond yields; Optimal monetary policy; Financial Stability |
| JEL: | E32 E44 E61 G12 |
| Date: | 2021–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:93000&r= |
| By: | Benjamin Schoefer |
| Abstract: | I propose a financial channel of wage rigidity. In recessions, rather than propping up marginal (new hires’) costs of labor, rigid average wages squeeze cash flows, forcing firms to cut hiring due to financial constraints. Indeed, empirical cash flows and profits would turn acyclical if wages were only moderately more procyclical. I study this channel in a search and matching model with financial constraints and rigid wages among incumbent workers, while new hires’ wages are flexible. Individually, each feature generates no amplification. By contrast, their interaction can account for much of the empirical labor market fluctuations—breaking the neutrality of incumbents’ wages for hiring, and showing that financial amplification of business cycles requires wage rigidity. |
| JEL: | E2 G3 J01 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29201&r= |
| By: | Korus, Arthur; Löher, Jonas; Nielen, Sebastian; Pasing, Philipp |
| Abstract: | Die Studie untersucht die Potenziale von Fintechs für kleine und mittlere Unternehmen (KMU). Fintechs bringen Kapitalangebot und -nachfrage oftmals effizienter zusammen als Banken. Ihre Lösungen können in Einzelfällen Finanzierungsgeschwindigkeiten beschleunigen, Kreditkonditionen verbessern und Finanzierungen ermöglichen. Darüber hinaus erhöhen Fintechs den Innovationsdruck auf etablierte Banken, ihre Prozesse und Dienstleistungen zu optimieren. Zunehmend kooperieren beide Seiten hierzu miteinander, wodurch Banken vermehrt als Plattformen agieren. Insbesondere etablierte KMU können demzufolge sowohl innerhalb als auch außerhalb der bestehenden Hausbankbeziehung von den verbesserten Angeboten profitieren. |
| Keywords: | Unternehmensfinanzierung,KMU-Finanzierung,Mittelstandsfinanzierung,Fintechs,digitale Finanzierung,Corporate Financing,SME Financing,Fintech,Digital Finance |
| JEL: | G20 G23 G30 O16 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifmmat:288&r= |
| By: | Mahamat Ibrahim Ahmat Tidjani (UFHB - Université Félix Houphouët-Boigny) |
| Abstract: | This paper aims to explore the state of financial inclusion in Chad. Adopting a Multiple Correspondence Analysis (MCA) on a sample of 1000 individuals from the Global Findex (2017), the study measured the inclusiveness of financial systems in Chad through a Financial Inclusion Index (FII). Furthermore, it assessed the distribution of the FII using the factor decomposition of the Gini coefficient. The findings showed that the average FII was low, 24.89%, and it varied between 7.43% and 60.35%. Financial institution account, deposit, withdrawal, and debit card ownership were the most influential indicators of financial inclusion in Chad. Moreover, the paper revealed that, despite its low level, financial inclusion was not smoothly distributed among the Chadian population (Gini coefficient of 0.196). The analysis of the financial inclusion inequality profile showed that there was a persistent financial inclusion gender gap in Chad, exacerbated by discriminations in education and income. Thus, policy interventions should target the provision of formal accounts, a reduction of costs of financial services (withdrawal and debit cards), and promoting formal savings by developing adequate savings products, to foster financial inclusion in Chad. Furthermore, these policies should be gender-responsive while considering its interaction with education and income. |
| Keywords: | Financial inclusion index,multiple correspondence analysis,inequality decomposition,Chad |
| Date: | 2020 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03322905&r= |
| By: | Nizam, Ahmed Mehedi |
| Abstract: | With the rapid proliferation of mobile telephony and the establishment of an IT-enabled payment and settlement system, Bangladesh, nowadays, is experiencing a meteoric rise in the usage of mobile financial services (MFS). As more and more people are opting to use this service, a huge number of mobile accounts are opened every day and a substantial amount of money is deposited, withdrawn and transferred frequently through the mobile network. This ever-increasing amount of mobile money flowing through the network may have a sizeable impact on the overall money supply of the country. Thus far, no systematic study has been conducted to quantify the impact of the mobile money on the conventional money supply of Bangladesh. In this study, we attempt to quantify the contribution of mobile money on the money supply which is an important quantity-based anchor of monetary policy in Bangladesh. Apart from quantifying the impact of digital (mobile) money on the money supply, we also qualitatively discuss its implication on another price-based nominal anchor of monetary policy in Bangladesh, i.e., interest rate. Moreover, in recent times, the government of Bangladesh has capped market interest rate with an intent to boost up business activities and in doing so, it (the government) has irrevocably broken the money market equilibrium which may result into dead-weight loss according to economic theory. Here, we qualitatively argue that financial inclusion through MFS has the potential to substantially reduce market interest rate without any manual intervention by significantly adding to the money supply which is supposed to be resulted into a reduced interest rate as an eventual consequence. |
| Keywords: | Mobile financial services; Bangladesh; financial inclusion; money supply; money multiplier; monetary policy |
| JEL: | E51 E52 G21 G28 O11 O33 |
| Date: | 2021–09–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109552&r= |
| By: | Seema Jayachandran |
| Abstract: | Reducing global poverty and addressing climate change and other environmental crises are among the most important challenges facing humanity today. This review article discusses one way in which these problems are intertwined: economic development affects the environment. I synthesize recent microempirical research on the environmental effects of economic development in low- and middle-income countries. The studies that I discuss identify the causal effects of specific aspects of economic development such as greater household purchasing power, expanded access to credit, more secure property rights, technological progress, and stronger regulatory capacity. I conclude by outlining some gaps in the literature. |
| JEL: | O13 Q56 |
| Date: | 2021–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:29191&r= |
| By: | Shahbaz, Muhammad; Sinha, Avik; Raghutla, Chandrashekar; Vo, Xuan Vinh |
| Abstract: | This paper contributes to literature by divulging the nature of scale and technique effects on renewable energy consumption, considering foreign direct investment (FDI) and financial development as considerable factors of renewable energy demand. The data for 39 countries over the period of 2000-2019 is used for empirical analysis. In doing so, second generation methodological approaches are applied to decompose scale and technique effects. The empirical results show the presence of cointegration between the model parameters, in the presence of cross-sectional dependence and structural breaks. Further, financial development is positively linked with renewable energy consumption. Foreign direct investment and renewable energy demand are positively linked. Composition effect has negative effect on renewable energy consumption. Economic growth and fossil fuel consumption have positive impact on renewable energy consumption. Long run estimation results indicate that renewable energy-FDI and renewable energy-financial development associations are U-shaped. It indicates that the scale effects exerted by FDI and financial development are overridden by technique and composition effects, and hence, the demand for renewable energy and consequential renewable energy consumption rises with the progression of economic growth. Based on this, policy suggestions are provided for these nations to ascertain sustainable development through bringing forth transformations in the energy policies. |
| Keywords: | Scale and Technique Effects, Financial Development, Foreign Direct Investment, Renewable Energy Consumption |
| JEL: | Q4 |
| Date: | 2021–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109125&r= |
| By: | Lahiani, Amine; Mefteh-Wali, Salma; Shahbaz, Muhammad; Vo, Xuan Vinh |
| Abstract: | In order to achieve the goal of carbon neutrality, as defined in the Paris climate agreement, the United States, the second-largest greenhouse gas emitter, must intensify its use of zero-carbon sources such as renewable energy. In this paper, we use the nonlinear autoregressive distributed lags (NARDL) model to investigate the influence of financial development on renewable energy consumption in the U.S. from 1975Q1 to 2019Q4. More precisely, three measures of financial development are considered: the overall financial development, bank-based financial development, and stock-based financial development indices. The model is augmented to control for the effects of real oil prices, real GDP, and trade openness. The empirical results show evidence of a long-run asymmetric effect of overall and stock-based financial development measures. Positive and negative changes in financial development measures dictate renewable energy consumption. In the short run, only negative changes of overall and stock-based financial development measures significantly impact renewable energy consumption. The latter impact is contemporaneously positive and negative at the one-lagged period. Renewable energy consumption does not react to a short-run change in bank-based financial development. Our empirical findings possess important policy implications. |
| Keywords: | Financial Development, Renewable Energy Consumption, USA |
| JEL: | Q4 |
| Date: | 2021–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109446&r= |
| By: | Mahmood, Haider |
| Abstract: | inancial development market (FMD) may have positive or negative environmental consequences. This research investigated the effects of FMD and income on CO2 emissions in Gulf Cooperation Council (GCC) countries during 1980-2018. We found that income had positive effect but FMD had insignificant impact on emissions in GCC panel. Then, we tested these effects in the individual country time series and found that income had positive impact in Saudi Arabia, Kuwait and Oman and had insignificant effect in other GCC countries in long run. Effect of FMD was positive in Oman, was negative in UAE and was insignificant in rest of GCC countries. Effect of income was positive in Saudi Arabia and Kuwait and was insignificant for other countries in short run. The effect of FMD was positive in Kuwait and was negative in UAE. We recommend UAE to expand the financial market and suggest Oman and Kuwait to have a check on the financially supported pollution-oriented activities. |
| Keywords: | financial market development, CO2 emissions, GCC |
| JEL: | Q53 |
| Date: | 2020–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:109134&r= |
| By: | Steuer, Sebastian; Tröger, Tobias |
| Abstract: | We study the design features of disclosure regulations that seek to trigger the green transition of the global economy and ask whether such regulatory interventions are likely to bring about sufficient market discipline to achieve socially optimal climate targets. We categorize the transparency obligations stipulated in green finance regulation as either compelling the standardized disclosure of raw data, or providing quality labels that signal desirable green characteristics of investment products based on a uniform methodology. Both categories of transparency requirements canbe imposed at activity, issuer, and portfolio level. Finance theory and empirical evidence suggest that investors may prefer "green" over "dirty" assets for both financial and non-financial reasons and may thus demand higher returns from environmentally-harmful investment opportunities. However, the market discipline that this negative cost of capital effect exerts on "dirty" issuers is potentially attenuated by countervailing investor interests and does not automatically lead to socially optimal outcomes. Mandatory disclosure obligations and their (public) enforcement can play an important role in green finance strategies. They prevent an underproduction of the standardized high-quality information that investors need in order to allocate capital according to their preferences. However, the rationale behind regulatory intervention is not equally strong for all categories and all levels of "green" disclosure obligations. Corporate governance problems and other agency conflicts in intermediated investment chains do not represent a categorical impediment for green finance strategies. However, the many forces that may prevent markets from achieving socially optimal equilibria render disclosure-centered green finance legislation a second best to more direct forms of regulatory intervention like global carbon taxation and emissions trading schemes. Inherently transnational market-based green finance concepts can play a supporting role in sustainable transition, which is particularly important as long as first-best solutions remain politically unavailable. |
| Keywords: | green finance,sustainable finance,ESG,mandatory disclosure,taxonomies,benchmarks,labels,asset pricing,market discipline,climate change,climate risk |
| JEL: | D4 D6 G1 G3 G4 K2 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:safewp:320&r= |