nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2021‒09‒13
thirty-one papers chosen by
Georg Man

  1. Financial Development and Economic Growth in a Microfounded Small Open Economy Model By Zhang, Bo; Zhou, Peng
  2. A semi-structural model with banking sector for stress testing scenario design By J. Sebastián Becerra; José Carreño; Juan Francisco Martínez
  3. Are Collateral-Constraint Models Ready for Macroprudential Policy Design? By Pablo Ottonello; Diego J. Perez; Paolo Varraso
  4. Does Informality Hinder Financial Development Convergence? Abstract: By Can Sever; Emekcan Yucel
  5. Bank as a Venture Capitalist By Rishabh, Kumar
  6. Financial Frictions, Equity Constraints, and Average Firm Size Across Countries By Bento, Pedro; Ranasinghe, Ashantha
  7. New Insight on Investment-Cash Flow Sensitivity By Sai Ding; Minjoo Kim; Xiao Zhang
  8. A Theory of the Global Financial Cycle By J. Scott Davis; Eric van Wincoop
  9. Exchange rate fluctuations and the financial channel in emerging economies By Beckmann, Joscha; Comunale, Mariarosaria
  10. Capital Controls and International Trade: An Industry Financial Vulnerability Perspective By Kevin Lai; Tao Wang; David Xu
  11. One Currency, Two Markets: China's Attempt to Internationalize the Renminbi By Edwin L.-C. Lai
  12. How the withdrawal of global correspondent banks hurts Emerging Europe By Borchert, Lea; de Haas, Ralph; Kirschenmann, Karolin; Schultz, Alison
  13. Asset encumbrance in euro area banks: analysing trends, drivers and prediction properties for individual bank crises By Berthonnaud, Pierre; Cesati, Enrico; Drudi, Maria Ludovica; Jager, Kirsten; Kick, Heinrich; Lanciani, Marcello; Schneider, Ludwig; Schwarz, Claudia; Siakoulis, Vasileios; Vroege, Robert
  14. Government Expenditures and Economic Growth: A Cointegration Analysis for Thailand under the Floating Exchange Rate Regime By Jiranyakul, Komain
  15. Is Public Debt Always Harmful to Economic Growth By Christian Richter; Sara El Asy
  16. Project Aid and Firm Performance By Silvia Marchesi; Tania Masi; Saumik Paul
  17. A firm level approach on the e¤ects of IMF programs By Silvia Marchesi; Pietro Bomprezzi
  18. How China lends: A rare look into 100 debt contracts with foreign governments By Anna Gelpern; Sebastian Horn; Scott Morris; Brad Parks; Christoph Trebesch
  19. Quantifying investment facilitation at country level: Introducing a new index By Berger, Axel; Dadkhah, Ali; Olekseyuk, Zoryana
  20. Barriers to entry and the role of African multinational corporations: Entrants in intermediate industrial products (inputs into construction) By Grace Nsomba; Thando Vilakazi
  21. Why Did Small Business Fintech Lending Dry Up During March 2020? By Itzhak Ben-David; Mark J. Johnson; René M. Stulz
  22. Homeowners have easier and cheaper access to business credit By Benedikt Vogt; Wolter Hassink; Matteo Millone; Remco Mocking
  23. Bank credit risk and performance: the case of Tunisian banks during the period 2005 – 2015 By Khalfallah, Fatma; Necib, Adel
  24. Financial intermediation and risk in decentralized lending protocols By Castro-Iragorri, C; Ramírez, J; Vélez, S
  25. Demographic Change and Private Savings in India By Jain, Neha; Goli, Srinivas
  26. Optimism gone bad? The persistent effects of traumatic experiences on investment decisions By Kim, Chi Hyun
  27. Does financial liquidity constraint have an impact on food security? By Das, Abhipsita; Cuffey, Joel
  28. Why Not Insure Prices? Experimental Evidence from Peru By Boyd, Chris M.; Bellemare, Marc F.
  29. The nexus between urbanization, renewable energy consumption, financial development, and CO2 emissions: evidence from selected Asian countries By Anwar, Ahsan; Sinha, Avik; Sharif, Arshian; Siddique, Muhammad; Irshad, Shoaib; Anwar, Waseem; Malik, Summaira
  30. Bank Carbon Risk Index – A simple indicator of climate-related transition risks of lending activity By Laszlo Bokor
  31. Climate Change and Fiscal Sustainability: Risks and Opportunities By Agarwala, M.; Burke, M.; Klusak, P.; Mohaddes, K.; Volz, U.; Zenghelis, D.

  1. By: Zhang, Bo (Beijing University of Chemical Technology); Zhou, Peng (Cardiff Business School)
    Abstract: The global financial crisis since 2008 revived the debate on whether or not and to what extent financial development contributes to economic growth. This paper reviews different theoretical schools of thought and empirical findings on this nexus, building on which we aim to develop a unified, microfounded model in a small open economy setting to accommodate various theoretical possibilities and empirical observations. The model is then calibrated to match some well-documented stylized facts. Numerical simulations show that, in the long run, the welfaremaximizing level of financial development is lower than the growth-maximizing level. In the short run, the price channel (through world interest rate) dominates the quantity-channel (through financial productivity), suggesting a vital role of international cooperation in tackling systemic risk of the global financial system.
    Keywords: economic growth; financial development; open economy; DSGE
    Date: 2021–09
  2. By: J. Sebastián Becerra; José Carreño; Juan Francisco Martínez
    Abstract: In this paper, we estimate a semi-structural New-Keynesian model for the Chilean economy. Our contribution consists of including a financial block, with an explicit description of the lending interest rate, credit volume, credit risk, and interest rate spreads. Firstly, we find the presence of a financial accelerator, that amplifies shocks. We find a significant relevance of financial sector feedback to the real economy. The incorporation of financial elements in a simple and flexible way allows the developed macro-financial model to be useful for various purposes. In this work, we carry out exercises in which extreme scenarios are simulated and are suitable for stress testing purposes.
    Date: 2021–07
  3. By: Pablo Ottonello; Diego J. Perez; Paolo Varraso
    Abstract: We study the design of macroprudential policies based on quantitative collateral-constraint models. We show that the desirability of macroprudential policies critically depends on the specific form of collateral used in debt contracts: While inefficiencies arise when current prices affect collateral---a frequent benchmark used to guide policies---they do not when only future prices affect collateral. Since the microfoundations and quantitative predictions of models with future-price collateral constraints do not appear less plausible than those using current prices, we conclude that additional empirical work is essential for the use of these models in macroprudential policy design.
    JEL: E32 E44 F32 F36 F38 G01
    Date: 2021–09
  4. By: Can Sever; Emekcan Yucel
    Date: 2021–02
  5. By: Rishabh, Kumar (University of Basel)
    Abstract: Banks all over the world show interest in acting as venture capitalists. In this paper, I argue that banks offer venture capital (VC) financing along with traditional (collateralized) loans in response to the natural constraints of the hidden information that they face. Innovative entrepreneurs pursue new technology that promises high return but runs a high risk of failure. The more innovative entrepreneurs also have higher reservation utility. This interaction between type-dependent returns and reservation utility creates a situation where collateral alone is not sufficient to screen entrepreneurs, and the uninformed bank needs an additional screening device. VC fulfils that role.
    Keywords: Bank, Venture Capital, Collateral, Debt, Screening
    JEL: G21 G24 D86
    Date: 2021–08–31
  6. By: Bento, Pedro (Texas A&M University); Ranasinghe, Ashantha (University of Alberta, Department of Economics)
    Abstract: We document new evidence that low equity in financially under-developed economies is associated with lower productivity investment, a smaller employment share of large firms, and smaller average firm size within sectors. We present a tractable model with heterogeneous entrepreneurs that face equity constraints that limit investment at entry. The model can be solved analytically, making clear predictions for the impact of equity constraints on outcomes of interest consistent with the evidence we document. The model can account for one-fifth to one-third of the variance in observed average firm size and TFP across countries, all substantial relative to the literature.
    Keywords: financial development; equity; firm size; investment; aggregate productivity
    JEL: O10 O14 O41 O43
    Date: 2021–08–31
  7. By: Sai Ding; Minjoo Kim; Xiao Zhang
    Abstract: The investment-cash flow sensitivity (ICFS) of Chinese listed firms declined during the global financial crisis, which contradicts the conventional financial constraint interpretation of ICFS. We analyze this interesting phenomenon by examining how cash flow uncertainty affects the ways to finance investment in China. We find that ICFS reveals not only the information between investment and cash flow but also the relationship between internal funds and external financing. When internal funds and external financing are complements, cash flow uncertainty decreases ICFS much more than when internal funds and external financing are substitutes. Our results remain robust when we consider the problem of endogeneity and use alternative measures of key variables. Our story is also supported by the sample of US firms, indicating that our new interpretation of ICFS based on cash flow uncertainty and the relationship between internal funds and external financing can apply to the general literature of corporate finance.
    Keywords: cash flow uncertainty, financial constraint, debt, cash flow, investment, China
    JEL: E22 G31 O16
    Date: 2021–09
  8. By: J. Scott Davis; Eric van Wincoop
    Abstract: We develop a theory to account for changes in prices of risky and safe assets and gross and net capital flows over the global financial cycle (GFC). The multi-country model features global risk-aversion shocks and heterogeneity of investors both within and across countries. Within-country heterogeneity is needed to account for the drop in gross capital flows during a negative GFC shock (higher global risk-aversion). Cross-country heterogeneity is needed to account for the differential vulnerability of countries to a negative GFC shock. The key vulnerability is associated with leverage. In both the data and the theory, leveraged countries (net borrowers of safe assets) deleverage through negative net outflows of risky assets and positive net outflows of safe assets, experience a rise in the current account and a greater than average drop in risky asset prices. The opposite is the case for non-leveraged countries (net lenders of safe assets).
    JEL: F30 F40
    Date: 2021–09
  9. By: Beckmann, Joscha; Comunale, Mariarosaria
    Abstract: This paper assesses the financial channel of exchange rate fluctuations for emerging countries and the link to the conventional trade channel. We analyze whether the effective exchange rate affects GDP growth, the domestic credit and the global liquidity measure as the credit in foreign currencies, and how global liquidity affects GDP growth. We make use of local projections in order to look at the shocks’ transmission covering 11 emerging market countries for the period 2000Q1–2016Q3. We find that foreign denominated credit plays an important macroeconomic role, operating through various transmission channels. The direction of effects depends on country characteristics and is also related to the policy stance among countries. We find that domestic appreciations increase demand regarding foreign credit, implying positive effects on investment and GDP growth. However, this is valid only in the short-run; in the medium-long run, an increase of credit denominated in foreign currency (for instance, due to apeiation) decreases GDP. The financial channel works mostly in the short run except for Brazil, Malaysia, and Mexico, where the trade channel always dominates. Possibly there is a substitution effect between domestic and foreign credit in the case of shocks in exchange rate.
    JEL: F31 F41 F43 G15
    Date: 2021–08–30
  10. By: Kevin Lai (Federal Reserve Bank of New York); Tao Wang (Swarthmore College); David Xu (Peterson Institute for International Economics)
    Abstract: Capital control policies have consequences for economic growth and international trade. Using data on 99 countries from 1995 to 2014, we find evidence that the effect of capital controls on trade vary across industries that have differing levels of external financing and asset tangibility. For exporting countries that tighten capital controls, industries that rely more heavily on external financing experience a larger decline in exports, while industries that possess more tangible assets experience a smaller decline in exports. For importing countries, tighter capital controls imply a decrease in trade, and this effect is uniform across all industries. The pattern with respect to external financing persists after accounting for availability of domestic credit and differences in industry shares and is predominantly found in countries with low levels of financial development. On the other hand, the varying effect related to asset tangibility is mostly absorbed by the domestic credit market.
    Keywords: Capital controls, Financial vulnerability, International trade
    JEL: F14 F38 F68
    Date: 2019–12
  11. By: Edwin L.-C. Lai (Professor of Economics, Hong Kong University of Science and Technology, Director of the Center for Economic Development Technology.Author-Email:
    Abstract: The global financial crisis in 2007-2009 caused a shortage of the US dollar all over the world. This sounded an alarm, reminding China that the dollar-based international monetary system (IMS) could be quite unreliable. In response, China began to accelerate the pace of RMB internationalization so as to eventually escape from the "dollar trap" i.e. become independent of the US, the USD, and an international monetary system (IMS) dominated by the USD. In order for the RMB to be a significant international currency, it has to be largely convertible in the capital account and China's financial market must be sufficiently deep, broad and liquid.
    Date: 2021–09
  12. By: Borchert, Lea; de Haas, Ralph; Kirschenmann, Karolin; Schultz, Alison
    Abstract: Correspondent banks allow local banks in emerging markets to access the international payments system. This helps local banks to make cross-border payments, clear currencies, and provide trade finance. The recent retrenchment of global correspondent banks following the increased costs of financial crime compliance may therefore disrupt international trade. This policy brief shows that the withdrawal of correspondent banks from Emerging Europe has negatively and substantially affected the exports of this region. Exploiting an unexpected change in the U.S. regulator's enforcement of financial crime legislation we compare industry-level bilateral trade flows of countries experiencing a high withdrawal with those that maintain their correspondent bank relationships. We find that the decreased availability of international payment and trade finance services has considerable negative effects on exports. This negative effect is stronger for trading partners that are geographically more distant. A survey of 93 local banks confirms that banks face growing difficulties in performing cross-border payments and in clearing currencies. In particular, access to the U.S. financial system is severely inhibited and local banks can only imperfectly substitute lost correspondent bank relationships with new partners from Russia and Austria.
    Date: 2021
  13. By: Berthonnaud, Pierre; Cesati, Enrico; Drudi, Maria Ludovica; Jager, Kirsten; Kick, Heinrich; Lanciani, Marcello; Schneider, Ludwig; Schwarz, Claudia; Siakoulis, Vasileios; Vroege, Robert
    Abstract: Asset encumbrance is a central concept in the context of banks’ liquidity crises, as it is associated with their capacity to obtain secured funding. This occasional paper summarises the work carried out by the task force on asset encumbrance, bringing together analyses by the ECB and those national competent authorities working on the topic. First, we describe how asset encumbrance has evolved in euro area banks, focusing on country and business model aggregates. Second, we conduct an econometric analysis of the driving factors of banks’ asset encumbrance, highlighting the relevance of credit risk, the availability of high quality collateral suitable for encumbrance, capital and sovereign funding conditions. Third, we turn our focus to the asset encumbrance dynamics of banks that have experienced a crisis. The outcome of this event study analysis indicates that asset encumbrance increases in the lead-up to a crisis, partly to offset early deposit outflows. Building on these findings, we show that asset encumbrance indicators carry predictive information for bank-specific crises as part of a multivariate early warning model. JEL Classification: G21, G01, G28, C23, C49
    Keywords: asset encumbrance, bank crisis, bank funding, collateral, early warning model, liquidity, panel econometrics
    Date: 2021–08
  14. By: Jiranyakul, Komain
    Abstract: Contributing to the controversial issue of the impact of government spending on economic growth, this paper shows that government spending has a long-run impact in stimulating aggregate output in Thailand during the floating exchange rate regime. The results reveal that the long-run relationship between aggregate output, government expenditures, and private consumption is stable. Based on the quarterly dataset from1997Q3 to 2019Q4, the results suggest that expansionary fiscal policy is effective under the floating exchange rate regime. Furthermore, the traditional version of Wagner’s law is supported since an expansion in aggregate output causes government expenditure to increase. Therefore, the findings in this paper support both the Keynesian hypothesis and Wagner’s law.
    Keywords: Government expenditures, real GDP, cointegration, causality
    JEL: E62
    Date: 2020–05
  15. By: Christian Richter (Faculty of Managemennt Technology, German University in Cairo); Sara El Asy (Faculty of Management Technology, German University in Cairo)
    Abstract: The relationship between public debt and economic growth has been crucial in economics and economic development not least since the financial crisis in 2007. The problem arises when debt reduces economic growth. Thus, the focus of this paper is to investigate the relationship between public debt and economic growth. In particular, we determine the debt threshold that affects this relationship. We find that there is no single debt threshold valid for all countries and in turn that each country possesses its own country specifics, which affect its economic growth. We also find that debt is not always harmful to economic growth. Last but not least, we compare recent debt levels with the threshold and average debt levels. We also find that exceeding a threshold does not necessarily result in immediate default. This holds in particular for Western European countries where debt levels exceed threshold levels by more than for developing economies.
    Keywords: Public debt, Economic growth, Debt Threshold, Threshold model, Time series.
    JEL: C13 C32 H63 H68
    Date: 2019–10
  16. By: Silvia Marchesi; Tania Masi; Saumik Paul
    Abstract: This paper evaluates the effect of development project aid from the World Bank and China on firms' Â’sales growth, using a large dataset of 110864 firms, spanning 121 countries between 2001 and 2016. We find that, contrary to the World Bank, Chinese ODA projects increase, on average, firm sales and, compared to sector-specific, Chinese region-speciÂ…c aid positively affect firm performance. Finally, we show that the positive effect of Chinese aid is stronger for firms lacking transport infrastructure (and with better electricity provision), suggesting that aid may improve firm performance by releasing their infrastructure constraints.
    Keywords: Aid effectiveness, World Bank projects, Chinese projects, Geo-coding, Firm growth.
    JEL: F35 O19 E24 E25
    Date: 2021–09
  17. By: Silvia Marchesi; Pietro Bomprezzi
    Abstract: This paper evaluates the effects of IMF programs at the firm level, using a panel of about 130,000 firms, over the period 2003-2018. We consider the different dimensions of a Fund program, namely participation, loan size and number and scope of conditions, and we look at their effects on growth of firm sales, as well as on income redistribution within the firm. Our identiÂ…cation strategy exploits the differential effect of changes in IMF liquidity on program participation (Lang 2016). We find a positive impact of IMF programs on firms' Â’sales growth, and the effect is persistent through time. What is more, we find that performance is improved through the alleviation of the firm financing constraint. More severe conditionality seems to worsen firm performance in the short run, but then turns beneficial over the years. Finally, we find that participating to an IMF program reduces the labor income share in the short term, but employment increases in the long run, suggesting that the increased income is reinvested into the firm.
    Keywords: IMF conditionality, IMF, Firm growth, Labor Income Share.
    JEL: F33 O19 E24
    Date: 2021–08
  18. By: Anna Gelpern (Peterson Institute for International Economics); Sebastian Horn (Kiel Institute for the World Economy); Scott Morris (Center for Global Development); Brad Parks (AidData; Center for Global Development); Christoph Trebesch (University of Kiel; Kiel Institute for the World Economy)
    Abstract: China is the world’s largest official creditor, but basic facts are lacking about the terms and conditions of its lending. Very few contracts between Chinese lenders and their government borrowers have ever been published or studied. This paper is the first systematic analysis of the legal terms of China’s foreign lending. The authors collect and analyze 100 contracts between Chinese state-owned entities and government borrowers in 24 developing countries in Africa, Asia, Eastern Europe, Latin America, and Oceania, and compare them with those of other bilateral, multilateral, and commercial creditors. Three main insights emerge. First, the Chinese contracts contain unusual confidentiality clauses that bar borrowers from revealing the terms or even the existence of the debt. Second, Chinese lenders seek advantage over other creditors, using collateral arrangements such as lender-controlled revenue accounts and promises to keep the debt out of collective restructuring (“no Paris Club†clauses). Third, cancellation, acceleration, and stabilization clauses in Chinese contracts potentially allow the lenders to influence debtors’ domestic and foreign policies. Even if these terms were unenforceable in court, the mix of confidentiality, seniority, and policy influence could limit the sovereign debtor’s crisis management options and complicate debt renegotiation. Overall, the contracts use creative design to manage credit risks and overcome enforcement hurdles, presenting China as a muscular and commercially savvy lender to the developing world.
    Keywords: China, International Lending, Foreign Aid, Debt Management, Sovereign Debt, Contract Law, Debt Restructuring, Debt Transparency
    JEL: F35 F34 H63 K12 K22 K33 P33
    Date: 2021–05
  19. By: Berger, Axel; Dadkhah, Ali; Olekseyuk, Zoryana
    Abstract: This article introduces a new and unique dataset for measuring the adoption of investment facilitation measures at country level. The Investment Facilitation Index (IFI) covers 117 individual investment facilitation measures, clustered in six policy areas, and maps their adoption for 86 countries. This article presents the conceptual and methodological background of the IFI and provides a first analysis of the level of adoption of investment facilitation measures across countries participating in the investment facilitation for development negotiations in the World Trade Organization (WTO). Our dataset reveals novel insights. Countries which have lower levels of adoption belong to the low-income and lower-middle-income country group and are often located in Africa, the Middle East and to some extent Latin America and the Caribbean. The strong correlation between FDI and the IFI score shows that countries with the lowest levels of FDI, and thus in need of policy tools to attract FDI, have the lowest levels of adoption when it comes to investment facilitation measures. Our dataset has direct relevance for current policy discussions on investment facilitation for development in the WTO but also for domestic-level policy-making. Furthermore, the IFI provides the basis for a future research agenda to assess the design and impact of a future WTO agreement.
    Date: 2021
  20. By: Grace Nsomba; Thando Vilakazi
    Abstract: Effective competition in the Southern and East African regions requires independent rivals competing across borders and within domestic markets through innovation and effort, investment, product quality, and prices. To understand the constraints to more dynamic rivalry between firms within the region, this paper considers the obstacles to integration from the perspective of fostering the development of domestic firms with strong capabilities.
    Keywords: African multinational corporations, Competition, Regional integration, Barriers to entry
    Date: 2021
  21. By: Itzhak Ben-David; Mark J. Johnson; René M. Stulz
    Abstract: With the onset of the COVID-19 crisis in March 2020, small business lending through fintech lenders collapsed. We explore the reasons for the market shutdown using detailed data about loan applications, offers, and take-up from a major small business fintech credit platform. We document that while the number of loan applications increased sharply early in March 2020, the supply of credit collapsed as online lenders dropped from the platform and the likelihood of applicants receiving loan offers fell precipitously. Our analysis shows that the drying up of the loan supply is most consistent with fintech lenders becoming financially constrained and losing their ability to fund new loans.
    JEL: G11 G21 G33
    Date: 2021–09
  22. By: Benedikt Vogt (CPB Netherlands Bureau for Economic Policy Analysis); Wolter Hassink (UU); Matteo Millone (DNB); Remco Mocking (Ministry of Finance)
    Abstract: Banks often demand collateral for business loans. Apart from business assets, for many small entrepreneurs their own home is the most important security they can offer. The interaction between the housing market and entrepreneurial credit can therefore amplify the consequences of an economic crisis. Because of declining collateral values, the probability of obtaining credit could be lower, making it more difficult to finance entrepreneurial activities. Between 2008 and 2013, real house prices declined by nearly 25 percent in the Netherlands. Such a decline in house prices can amplify the effect of an economic crisis via the credit channel for small entrepreneurs. In the economic literature this effect is known as collateral lending channel. In this study we answer three questions: to what extent did the decrease in house prices impact the incidence of bank credit of small companies? what is the relationship between the housing market status of an entrepreneur and the costs of credit? Is there, as a consequence, an association between the housing market status and entrepreneurial exits?
    JEL: G23 L26 R2 R31
    Date: 2021–03
  23. By: Khalfallah, Fatma; Necib, Adel
    Abstract: The main objective of this research is to study the impact of bank credit risk on performance. The empirical tests were carried out on panel data of firms belonging to the Tunisian banking sector institutions. To answer this research problem, we have analyzed in a first chapter the link between risk and financial performance. Then, based on financial theories, we formulated a set of hypotheses related to the influence of Investment, bank size, presence of women and board independence on performance. The results of the empirical tests indicate that risk has a positive effect on performance. Conversely, the empirical tests show that bank size and dual function had negative effects on performance. Finally, the results of the tests on bank risk are mixed depending on the characteristics of the board of directors.
    Keywords: ROA, ROE, Performance, Tunisian Bank, Risk, Corporate Governance
    JEL: M10
    Date: 2020–08–31
  24. By: Castro-Iragorri, C; Ramírez, J; Vélez, S
    Abstract: We provide an overview of decentralized protocols like Compound and Aave that offer collateralized loans for cryptoasset investors. Compound and Aave are two of the most important application in the decentralized finance (DeFi) ecosystem. Using publicly available information on rates, supply and borrow activity, and accounts we analyze different elements of the protocols. In particular, we estimate ex-post margins that give a comprehensive account of the cost of financial intermediation. We find that ex-post margins considering all markets are 1% and lower for stablecoin markets. In addition, we estimate quarterly indicators regarding solvency, asset quality, earnings and market risk similar to the ones used in traditional banking. This provides a first look at the use of these metrics and a comparison between the similarities and challenges to our understanding of financial intermediation in these protocols based on tools used for traditional banking.
    Keywords: Decentralized finance, Compound, Aave, collateralize loans, intermediation margins, camels
    JEL: C63 C80 E51 G21 G23 G51 O16 O33
    Date: 2021–07–27
  25. By: Jain, Neha; Goli, Srinivas
    Abstract: India is on the edge of a demographic revolution with a rapidly rising working-age population. For the first time in this study, we investigate the role of the rising working-age population on per capita small savings in post offices and banks net of socio-economic characteristics using state-level panel data compiled from multiple sources for the period 2001-2018. Our comprehensive econometric assessment with multiple robustness checks provide three key findings: (1) Per capita private savings is increasing because of India’s growing working-age population, thus the ‘economic life cycle hypothesis’ is supported. (2) The demographic factors contribute around one-fourth of the per capita private savings inequality across Indian states. (3) The demographic window of economic opportunity for India can yield maximum benefits in terms of private savings when accompanied by favourable socio-economic policies on education, health, gender equity, and economic growth.
    Keywords: Demographic change, Working age population, Private savings, Life cycle hypothesis, State-level analysis
    JEL: J1 J11 O1 O15 O16
    Date: 2021–02–15
  26. By: Kim, Chi Hyun
    Abstract: Do memories of highly emotional stock market crashes permanently affect the investment decisions of households? The Initial Public Offerings of Deutsche Telekom during 1996- 2000 provide an optimal base to address this question, as it is known for its emotional character and is reputedly "the last time Germans invested in stocks." Using Socio-Economic Panel (SOEP) household survey data, I show that having experienced this event leads to persistently lower stock market participation in the future. In addition, this effect is greater for households that had directly invested in Telekom shares, those being more likely to have high emotional experiences. Finally, I also show that such traumatic experiences on investment decisions have intergenerational consequences, significantly affecting how the next generation invests in the financial market.
    Keywords: Household finance,stock market participation,financial crises
    JEL: D14 G01 G11 E21
    Date: 2021
  27. By: Das, Abhipsita; Cuffey, Joel
    Keywords: Marketing, Agricultural and Food Policy, Agricultural Finance
    Date: 2021–08
  28. By: Boyd, Chris M.; Bellemare, Marc F.
    Keywords: Marketing, Agricultural Finance, Institutional and Behavioral Economics
    Date: 2021–08
  29. By: Anwar, Ahsan; Sinha, Avik; Sharif, Arshian; Siddique, Muhammad; Irshad, Shoaib; Anwar, Waseem; Malik, Summaira
    Abstract: In terms of attaining the objectives of Sustainable Development Goals (SDGs), the Asian economies are considered as laggards, and one of the major problems faced by these economies is the issue of environmental degradation. For addressing this pertaining issue, a policy-level reorientation might be necessary. In this view, this study aims to explore the impact of urbanization, renewable energy consumption, financial development, agriculture, and economic growth on CO2 emissions in 15 Asian economies over 1990-2014. The empirical evidence demonstrates that urbanization, financial development, and economic growth increase CO2 emissions, renewable energy consumption reduces CO2 emissions, and the impact of agriculture is insignificant. Impulse response function and variance decomposition techniques are used to test the causality among the variables. Based on the study outcomes, a comprehensive SDG-oriented policy framework has been recommended, so that these economies can make progression towards attaining the objectives of SDG 13 and SDG 7. This study contributed to the literature by recommending this SDG-oriented policy framework, which encapsulates economic growth and its drivers.
    Keywords: Urbanization; Renewable Energy Consumption; Financial Development; CO2 emission; SDG
    JEL: Q2 Q4 Q5
    Date: 2021
  30. By: Laszlo Bokor (Magyar Nemzeti Bank (Central Bank of Hungary))
    Abstract: I propose a simple indicator of climate-related transition risks of banks’ lending activity based on transaction-level loan data. The underlying idea is that the higher the greenhouse gas intensity of an economic activity (and so a debtor), the higher its transition risk. Recent Hungarian trends of this indicator alerts to significantly regrowing risks.
    Keywords: climate change, transition risk, greenhouse gas intensity, lending activity, risk indicator
    JEL: C43 G21 Q54
    Date: 2021
  31. By: Agarwala, M.; Burke, M.; Klusak, P.; Mohaddes, K.; Volz, U.; Zenghelis, D.
    Abstract: Both the physical and transition-related impacts of climate change pose substantial macroeconomic risks. Yet, markets still lack credible estimates of how climate change will affect debt sustainability, sovereign creditworthiness, and the public finances of major economies. We present a taxonomy for tracing the physical and transition impacts of climate change through to impacts on sovereign risk. We then apply the taxonomy to the UK's potential transition to net zero. Meeting internationally agreed climate targets will require an unprecedented structural transformation of the global economy over the next two or three decades. The changing landscape of risks warrants new risk management and hedging strategies to contain climate risk and minimise the impact of asset stranding and asset devaluation. Yet, conditional on action being taken early, the opportunities from managing a net zero transition would substantially outweigh the costs.
    Keywords: Sovereign debt, climate change, net zero, transition risk, productivity
    Date: 2021–09–06

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