nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2021‒09‒20
twenty-two papers chosen by
Georg Man

  1. Structural Change Ramifications of Consumer Credit Expansion in a Two Sector Growth Model By Esra Nur Ugurlu
  2. Remittances, Natural Resource Rent and Economic Growth in Sub-Saharan Africa By Pamela E. Ofori; Daryna Grechyna
  3. Pression Fiscale Optimale et Croissance Economique en République Démocratique du Congo : 1990 -2020 By Elie Ndemba Tshilambu
  4. How Financial Sector Development Improve Tax Revenue Mobilization for Developing Countries? By Aguima Aimé Bernard Lompo
  5. The Economic and Institutional Determinants of Foreign Direct Investments By Maxime Delabarre
  6. Holding the Economy by the Tail: Analysis of Short- and Long-run Macroeconomic Risks By Michal Franta; Jan Libich
  7. Monetary and macroprudential policy: The multiplier effects of cooperation. By Federico Bassi; Andrea Boitani
  8. Sectorial holdings and stock prices: the household-bank nexus By Matías Lamas; David Martínez-Miera
  9. Adoption of fintech services: role of saving and borrowing mechanisms By Babak Naysary; Ruth Tacneng; Amine Tarazi
  10. Effect of mobile financial services on financial behavior in developing economies-Evidence from India By Shreya Biswas
  11. Optimal capital ratios for banks in the euro area By Beau Soederhuizen; Bert Kramer; Harro van Heuvelen; Rob Luginbuhl
  12. Systemic implications of the bail-in design By Farmer, J. Doyne; Goodhart, C. A. E.; Kleinnijenhuis, Alissa M.
  13. Some Reflections on Financial Instability in Macro Agents-Based Models. Genealogy and objectives 1 By Muriel Dal-Pont Legrand
  14. Shadow Banks and the Collateral Multiplier By Thomas R. Michl; Hyun Woong Park
  15. The multiplier effect of convertible local currencies : case study on two French schemes By Oriane Lafuente-Sampietro
  16. Large-scale Victorian manufacturers: reconstructing the lost 1881 UK employer census By Hannah, Leslie; Bennett, Robert J.
  17. How Collateral Affects Small Business Lending: The Role of Lender Specialization By Manasa Gopal
  18. Effect of Equipment Credit on the Agricultural Income of Cotton Producers in Mali By Lassana Toure
  19. Staying afloat in the milk business: Borrowing and selling on credit among informal milk vendors in Nairobi By Myers, Emily; Heckert, Jessica; Galiè, Alessandra; Njiru, Nelly; Alonso, Silvia
  20. Accelerating the Speed and Scale of Climate Finance in the Post-Pandemic Context By Jean-Charles Hourcade; Dipak Dasgupta; F. Ghersi
  21. Climate Transition Risk Metrics: Understanding Convergence and Divergence across Firms and Providers By Julia Anna Bingler; Chiara Colesanti Senni; Pierre Monnin
  22. Using solar panels for business purposes: Evidence based on high-frequency power usage data By Weisser, Christoph; Lenel, Friederike; Lu, Yao; Kis-Katos, Krisztina; Kneib, Thomas

  1. By: Esra Nur Ugurlu (Department of Economics, University of Massachusetts Amherst)
    Abstract: This paper analyzes the structural change implications of consumer credit expansions in a dual-sector open economy growth model. Policy-induced increases in banks’ willingness and ability to lend result in new consumer lending, boosting consumption demand and average wages in the nontradable sector. Under the assumptions of fixed relative wages and mark-up pricing, wage pressures translate into inflationary pressures. The central bank, acting under the sole target of controlling inflation, raises the interest rate to contain inflationary pressures. This intervention causes a real exchange rate appreciation, followed by a loss of international competitiveness in the tradable sector. This way, the model illustrates that consumer credit expansions can trigger premature deindustrialization, shifting sectoral structure in favor of the nontradable sector. The formal model is inspired by the Turkish economy that experienced a notable expansion of consumer credit between 2002-2013.
    Keywords: Consumer credit, structural change, economic growth, inflation targeting, real exchange rate
    JEL: E58 F43 L16 O11 O41
    Date: 2021
  2. By: Pamela E. Ofori (University of Insubria, Varese, Italy); Daryna Grechyna (University of Granada, Spain)
    Abstract: Despite the established link between oil rent fluctuations and remittances received, its plausible joint effect on economic growth in Sub-Saharan Africa (SSA) remains unexplored. To fill this gap, first, we determine whether natural resource rent (composed of oil rent, forest rent and natural gas rent) reduces economic growth in SSA. Second, we examine whether positive macroeconomic signals such as remittances mitigate the negative effect of oil rents on economic growth in a sample of 43 SSA countries spanning 1990-2017. We employ the pooled ordinary least squares, fixed-effects and random-effects, and generalized method of moments. The resulting empirical evidence established are; (1) there is a positive impact of forest rent on economic growth whilst oil rent and natural gas rent have a negative impact on economic growth (2) there is a positive marginal and net effect on economic growth from the interaction between remittances and oil rent. Also, the unconditional effect of remittances on growth is positive. We further perform a threshold analysis to establish a critical ground that could also influence economic growth positively. This threshold is crucial because below these critical mass remittance inflows mitigate the negative incidence of oil rent on economic growth and above the threshold, negative oil rent on growth is completely nullified. This is relevant for policy implications because policymakers are provided with actionable levels of remittances which are easily attainable in sampled countries.
    Keywords: Remittances, Natural resource rent, oil rent, Economic growth, Sub-Saharan Africa
    Date: 2021–01
  3. By: Elie Ndemba Tshilambu (Université protestante au Congo - Université protestante au Congo)
    Abstract: L'objectif du présent article est d'analyser le rôle de la fiscalité et mesurer l'effet de celle-ci à travers son impact sur le capital public, dans la croissance économique en République Démocratique du Congo en s'appuyant sur le modèle de croissance endogène de Barro (1990) et à déterminer le taux optimal de pression fiscale à travers l'estimation du modèle de SCULLY. L'interaction entre la fiscalité et la croissance pourrait avoir une allure non linéaire, sous la forme d'une courbe de LAFFER, le test Hansen va servir à montrer l'effet de seuil dans la relation non linéaire entre la pression fiscale et la croissance économique. Un modèle ARDL a été estimé sur la période 1990-2020 pour analyser la dynamique de ces deux variables. Les résultats obtenus vont dans le sens d'une relation croissante entre la fiscalité et la croissance économique en RDC. Ainsi, à travers l'impôt, les ménages contribuent au financement du capital public qui conduit in fine à améliorer la croissance économique. Il en est ressorti de cette étude que les niveaux des composantes fiscales observés n'ont pas été efficients et optimaux par rapport aux taux de croissance économique observés en RDC durant la période 1990-2020. L'estimation du modèle de SCULLY révèle qu'avec un niveau de 23% de pression fiscale, on peut avoir une croissance économique soutenue.
    Keywords: Politique Budgétaire,Croissance économique,Pression fiscale Classification JEL : E62,E22,O40,C11
    Date: 2021–04–28
  4. By: Aguima Aimé Bernard Lompo (CERDI - Centre d'Études et de Recherches sur le Développement International - CNRS - Centre National de la Recherche Scientifique - UCA - Université Clermont Auvergne)
    Abstract: This study examines the effect of financial development on tax revenue mobilization in developing countries. Our empirical analysis uses the aggregate financial index that comprises the banking system's depth (size and activity), access, and efficiency of financial institutions and financial markets. Using panel data from developing countries over the period 1995-2017, our findings suggest that more developed financial sectors positively and significantly influence the government's ability to raise tax revenue. More interestingly, we find that this favorable effect is sensitive to developing countries characteristics, namely the level of economic development, the degree of financial openness and the stance of fiscal policies. When we more precisely look at the effects of disaggregated financial development components on tax revenues mobilization, we find that the estimated coefficients on the sub-components of financial development are statistically significant at least at 5 % of significance, except for the financial market's efficiency. The results denote that tax revenue in developing countries depends on financial institutions and financial markets. Finally, our results show that financial development contributes positively to tax revenue mobilization excluding resources.
    Keywords: Financial development,Economic growth
    Date: 2021–08
  5. By: Maxime Delabarre (Sciences Po - Sciences Po)
    Abstract: This paper aims to investigate the economic and institutional determinants of Foreign Direct Investment in the world post-2000. To this end, I analyze the inwards stocks of FDIs using unilateral and bilateral data. Based on the UNCTAD database, I also study the impact of Bilateral Investment Treaties on the inflow of FDIs. Main results provide evidence supporting the idea that treaties increase the inflows of FDIs in the years following their signature. However, regulations aimed at increasing the protection of property rights have a larger effect on the attractiveness for investors. This paper does not find robust evidence demonstrating that political stability and corruption level have significant effects. More, I demonstrate that an increase of tariffs in the host country results in an increase of FDIs, supposedly due to relocation processes.
    Keywords: FDI,economics,law,investments,institutions,political,development
    Date: 2021–09–04
  6. By: Michal Franta; Jan Libich
    Abstract: We put forward a novel macro-financial empirical modelling framework that can examine the tails of distributions of macroeconomic variables and the implied risks. It does so without quantile regression, also allowing for non-normal distributions. Besides methodological innovations, the framework offers a number of relevant insights into the effects of monetary and macroprudential policy on downside macroeconomic risk. This is both from the short-run perspective and from the long-run perspective, which has been remained unexamined in the existing Macro-at-Risk literature. In particular, we estimate the conditional and unconditional US output growth distribution and investigate the evolution of its first four moments. The short-run analysis finds that monetary policy and financial shocks render the conditional output growth distribution asymmetric, and affect downside risk over and above their impact on the conditional mean that policymakers routinely focus on. The long-run analysis indicates, among other things, that US output growth left-tail risk showed a general downward trend in the two decades preceding the Global Financial Crisis, but has started rising in recent years. Our examination strongly points to post-2008 unconventional monetary policies (quantitative easing) as a potential source of elevated long-run downside tail risk.
    Keywords: Downside tail risk, growth-at-risk, macroeconomic policy, macro-financial modeling, non-normal distribution, threshold VAR, US output growth
    JEL: C53 C54 E32
    Date: 2021–09
  7. By: Federico Bassi; Andrea Boitani (Università Cattolica del Sacro Cuore; Dipartimento di Economia e Finanza, Università Cattolica del Sacro Cuore)
    Abstract: A BMW model is augmented with a credit market affected by banks’ balance sheet and used to assess the dynamic performance of an economy in the face of demand and financial shocks under different assumptions about the interactions between monetary and macroprudential policy. We show that the regulatory bank’s capital requirement has a multiplier effect that interferes with monetary policy, thus influencing the credit market and the output gap, and this multiplier effect varies according to the institutional arrangements in which macroprudential and monetary policies are embedded. In particular, we find that cooperation between monetary policy and macroprudential policy delivers the best overall stabilization outcomes in the face of both negative demand and bank equity shocks, if such shocks are not highly persistent. As shock persistence increases, non-cooperation or a simple leaning against the wind monetary policy outperform cooperation. However, adding countercyclical capital buffers in the macroprudential toolkit reinstates the original ranking of institutional arrangements with cooperation dominating overall.
    Keywords: Financial Frictions, Monetary Policy, Macroprudential Policy, Policy Coordination.
    JEL: E44 E52 E58 E61 G21 G28
    Date: 2021–09
  8. By: Matías Lamas (Banco de España); David Martínez-Miera (UC3M and CEPR)
    Abstract: We analyze the evolution and price implications of aggregate sectorial holdings of stocks, using detailed information on the universe of publicly traded stocks in the euro area. We document that: i) households’ (HH) direct holdings represent a higher fraction of total ownership in domestic bank stocks than in non-financial corporation (NFC) stocks; ii) HH holdings of stocks increase (decrease) following a decline (increase) in the stock price, especially for domestic bank stocks; and iii) an increase in domestic HH holdings is followed by future (persistent) increases in the price of NFC stocks, but not for bank stocks. Moreover, during equity issuances, an increase in the share of domestic HH holdings is followed by a future (persistent) decrease in the stock price of bank stocks, but not for NFC stocks. Our results are consistent with HH being liquidity providers in the stock market, and at the same time subject to negative information asymmetries. We argue that this latter effect is more prevalent in domestic bank stocks than in NFC given the close relationships between HH and banks.
    Keywords: household ownership, stock prices, equity issuance, banks, non-financial corporations, liquidity provision, informational asymmetries
    JEL: G11 G14 G21 G50
    Date: 2021–08
  9. By: Babak Naysary (INTI International University, Faculty of Business, Nilai, Malaysia); Ruth Tacneng (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges); Amine Tarazi (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)
    Abstract: This paper investigates the relationship between an individual's saving and borrowing practices and his/her propensity to use fintech services. More particularly, we examine whether having multiple saving and borrowing channels increases a person's likelihood to participate in online funding platforms, and use robo-advisors. Using a sample of over 2000 respondents to a survey we conducted in Malaysia, our main results indicate that individuals who save and borrow via multiple channels, and through external conduits, are more likely to use fintech services than their counterparts. This is consistent with the view that individuals who use multiple saving and borrowing conduits are more likely to perform mental accounting, a concept which is commonly used by fintech companies to facilitate personal wealth management. Further, our findings reveal that among respondents with multiple saving channels, those who put less importance on trust in financial products, and consider financial returns essential, are the most likely users of fintech services. Overall, our findings offer new insights by providing a better understanding of the factors that foster the use of fintech services.
    Keywords: alternative lending,trust,fintech,P2P lending platforms,crowdfunding,robo-advisors
    Date: 2021–09–06
  10. By: Shreya Biswas
    Abstract: The study examines the relationship between mobile financial services and individual financial behavior in India wherein a sizeable population is yet to be financially included. Addressing the endogeneity associated with the use of mobile financial services using an instrumental variable method, the study finds that the use of mobile financial services increases the likelihood of investment, having insurance and borrowing from formal financial institutions. Further, the analysis highlights that access to mobile financial services have the potential to bridge the gender divide in financial inclusion. Fastening the pace of access to mobile financial services may partially alter pandemic induced poverty.
    Date: 2021–09
  11. By: Beau Soederhuizen (CPB Netherlands Bureau for Economic Policy Analysis); Bert Kramer (CPB Netherlands Bureau for Economic Policy Analysis); Harro van Heuvelen (CPB Netherlands Bureau for Economic Policy Analysis); Rob Luginbuhl (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: Capital buffers help banks to absorb financial shocks. This reduces the risk of a banking crisis. However, on the other hand capital requirements for banks can also lead to social costs, as rising financing costs can lead to higher interest rates for customers. In this research we make an exploratory analysis of the costs and benefits of capital buffers for groups of European countries. In this study, we estimate the optimal level of capital for banks in the euro area. As far as we know, we are the first to investigate this for the euro area. The optimal level results from a trade-off between the social costs and benefits of capital requirements. Depending on technical assumptions, we find an optimal capital buffer between 15 and 30 percent. Despite this considerable spread, the estimated optimum is in all cases higher than the current minimum requirements of Basel III. We also find significant heterogeneity in the optimum between euro area Member States. For Member States with a more stable economy and a banking sector that can easily attract funding we find lower optimal capital ratios.
    JEL: C33 C54 E44 G15 G21
    Date: 2021–09
  12. By: Farmer, J. Doyne; Goodhart, C. A. E.; Kleinnijenhuis, Alissa M.
    Abstract: The 2007-2008 financial crisis forced governments to choose between the unattractive alternatives of either bailing out a systemically important bank (SIB) or allowing it to fail disruptively. Bail-in has been put forward as an alternative that potentially addresses the too-big-to-fail and contagion risk problems simultaneously. Though its efficacy has been demonstrated for smaller idiosyncratic SIB failures, its ability to maintain stability in cases of large SIB failures and system-wide crises remains untested. This paper’s novelty is to assess the financial-stability implications of bail-in design, explicitly accounting for the multilayered networked nature of the financial system. We present a model of the European financial system that captures all five of the prevailing contagion channels. We demonstrate that it is essential to understand the interaction of multiple contagion mechanisms and that financial institutions other than banks play an important role. Our results indicate that stability hinges on the bank-specific and structural bail-in design. On one hand, a welldesigned bail-in buttresses financial resilience, but on the other hand, an ill-designed bail-in tends to exacerbate financial distress, especially in system-wide crises and when there are large SIB failures. Our analysis suggests that the current bail-in design may be in the region of instability. While policy makers can fix this, the political economy incentives make this unlikely.
    Keywords: bail-in; bail-in deisgn; contagion; default; financial crisis; financial networks; political economy; resolution; systemically important banks; too big to fail
    JEL: F3 G3
    Date: 2021–09–03
  13. By: Muriel Dal-Pont Legrand (CNRS - Centre National de la Recherche Scientifique, GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (... - 2019) - COMUE UCA - COMUE Université Côte d'Azur (2015 - 2019) - CNRS - Centre National de la Recherche Scientifique - UCA - Université Côte d'Azur, UCA - Université Côte d'Azur)
    Abstract: This paper analyses how the macro agent-based literature which developed intensively during the last decades, analyses the issue of financial instability. This paper focuses its attention on two specific researchers' communities which, within this new paradigm, specifically emphasize this question. We examine their common analytical foundations, how they have been influenced by anterior research programs, and we distinguish their modeling strategies and how these distinct strategies led them to follow somewhat different objectives.
    Abstract: Ce papier analyse comment la macroéconomie multi-agents (MABM) qui a récemment connu un développement important, analyse la question de l'instabilité financière. Ce papier focalise l'attention sur deux communautés de chercheurs qui, au sein de ce paradigme, contribuent aujourd'hui plus spécifiquement à cette question. Nous examinons leurs fondements analytiques communs, notamment via les influences partagées issues de programmes de recherche antérieurs, ainsi que leurs stratégies de modélisation respectives et montrons ainsi comment ces dernières les conduisent à définir des objectifs quelque peu différents.
    Keywords: Minsky,K&S,CATS,microeconomic foundations,financial instability,Macro agent-based models,Leijonhufvud,Stiglitz
    Date: 2021–08–25
  14. By: Thomas R. Michl (Colgate University, Department of Economics); Hyun Woong Park (Denison University, Department of Economics)
    Abstract: With an emphasis on contributing to macroeconomic pedagogy we examine the collateral multiplier by comparing it to the traditional money multiplier in a simplified framework of traditional banking and shadow banking in which government bonds are the core assets. While the money multiplier is a measure of the ability of the banking system to intermediate sovereign debt by creating deposits, the collateral multiplier is a measure of the shadow banking system’s ability to inter- mediate sovereign debt by creating shadow money. It also measures the degree of re-use of sovereign debt as collateral. In this setup, the collateral multiplier is defined as the ratio between dealer banks’ matched book repo activity relative to their trading book. Using the New York Fed’s Primary Dealer Statistics data, we empirically estimate the collateral multiplier for U.S. Treasury repo collateral. Our model and empirical results shed light on the transmission mechanisms of monetary policy channeled through shadow banks and on the U.S. Treasuries market turmoil induced by COVID-19 in March 2020.
    Keywords: shadow banks, collateral multiplier, rehypothecation, Treasury bond, repo.
    JEL: A2 E51
    Date: 2021
  15. By: Oriane Lafuente-Sampietro (TRIANGLE - Triangle : action, discours, pensée politique et économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - IEP Lyon - Sciences Po Lyon - Institut d'études politiques de Lyon - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - CNRS - Centre National de la Recherche Scientifique)
    Abstract: Convertible local currencies are alternative monetary instruments issued by groups of citizens to circulate in a given territory. They are used by businesses and citizens who accept it as means of payments constituting, hence, a monetary community. Their impacts on economic activity are mainly related to their circulation within the user community. Businesses that have received local currency as payment must spend it with other members. A local currency, thus, acts as a constraint favoring the development of new commercial relations in the network and increasing the demand among local businesses involved in the scheme. In this article, we model the income circulation between convertible currencies users as a local multiplier, called the convertible local currency multiplier. By using the Local Multiplier 3 empirical approach (Sacks, 2002) on two convertible currencies transactions data, we compute an indicator summarizing the income generated for the monetary community by the change and expense of euros into a local currency. This new indicator enables not only consumers to estimate the impact of their actual consumption in local currency, but also potential public decision-makers to know the total effect of their expenses when they use local currency on their territory to finance some of their policies. For example, this indicator could be used to measure the direct and indirect effects of a subsidy paid in local currency to institutions, businesses or households. The computed multiplier is greater than two for both currencies, which is in the higher range of LM3 estimated in the literature.
    Keywords: Local multiplier,Local currency,Multiplier economics,Multiplicateur local,Monnaie locale alternative,Monnaie locale complémentaire
    Date: 2021–06–01
  16. By: Hannah, Leslie; Bennett, Robert J.
    Abstract: We present the first available - and near-complete - list of large UK manufacturers in 1881, by complementing the employer data from that year’s population census (recovered by the British Business Census of Entrepreneurs project) with employment and capital estimates from other sources. The 438 largest firms with 1,000 or more employees accounted for around one-sixth of manufacturing output. Examples can be found in most industries. Exploiting powered machinery, intangible assets, new technologies and venture capital, and generally operating in competitive markets, their exports about equalled domestic sales. The more capital-intensive accessed stock markets, more - and in larger firms - than in follower economies. Some alleged later causes of UK decline relative to the US or Germany cannot be observed in 1881. Indeed, contemporary overseas observers - capitalist and socialist - correctly recognized the distinctive features of UK manufacturing as its exceptional development of quoted corporations, professional managers and “modern,” scalable, factory production.
    Keywords: large manufacturers; capital intensity; industrial concentration; stock exchanges
    JEL: L60 N63 N83
    Date: 2021–09–01
  17. By: Manasa Gopal
    Abstract: I study the role of collateral on small business credit access in the aftermath of the 2008 financial crisis. I construct a novel, loan-level dataset covering all collateralized small business lending in Texas from 2002-2016 and link it to the U.S. Census of Establishments. Using textual analysis, I show that post-2008, lenders reduced credit supply to borrowers outside of the lender's collateral specialization. This result holds when comparing lending to the same borrower from different lenders, and when comparing lending by the same lender to different borrowers. A one standard deviation higher specialization in collateral increases lending to the same firm by 3.7%. Abstracting from general equilibrium effects, if firms switched to lenders with the highest specialization in their collateral, aggregate lending would increase by 14.8%. Furthermore, firms borrowing from lenders with greater specialization in the borrower's collateral see a larger growth in employment after 2008. Finally, I show that firms with collateral more frequently accepted by lenders in the economy find it easier to switch lenders. In sum, my paper shows that borrowing from specialized lenders increases access to credit and employment during a financial crisis.
    Date: 2021–08
  18. By: Lassana Toure (University of Segou)
    Abstract: In Mali, lack of access to agricultural credit becomes a factor behind low farmer income and even rural poverty. However, agricultural credit is seen as a tool to increase production as well as farm income. The objective of this research is to evaluate the effect of equipment credit on the income of cotton producers in Mali. To this end, a survey was carried out among 400 producers in 2019, 127 of whom had had their equipment credit applications accepted, compared to 273 who had not had their equipment credit applications accepted. The survey was carried out in the areas of the Compagnie Malienne de Développement de Textiles (CMDT) of Fana and Koutiala in Mali. The method of analysis is the estimation of the instrumental variables multiple regression model of credit, implementing the estimation method of Heckman (1979) to account for the zero profit for 16% of the producers. The results of the econometric model estimates show that the variables that lead to an increase in income at the 5% threshold are: access to credit, quantity sold of cotton, costs of material goods used on the farm, total area sown, quantity sold of other crops, selling price of other crops. In other words, access to equipment credit could enable cotton producers to improve their income by 35%. Equipment credit entitles farmers to use more capital goods on the farm. This use of equipment increases agricultural productivity and yields, and in turn increases farm income.Based on these results, we can make some policy recommendations to boost cotton production, make other crops more beneficial to producers andgrant more equipment credit.
    Keywords: Equipment credit,heckman,instrumental variable,cotton producer,agricultural income,CMDT,Mali
    Date: 2021
  19. By: Myers, Emily; Heckert, Jessica; Galiè, Alessandra; Njiru, Nelly; Alonso, Silvia
    Abstract: Studies on credit schemes for small-scale entrepreneurs have documented their potential to alleviate poverty and improve food security, nutrition, and health outcomes in low- and middle-income countries. Other studies find mixed impacts of credit schemes on reducing income inequality, empowering women, and enhancing children’s education. Moreover, growing evidence finds that entrepreneurs offer credit to customers; little is known about what this practice means for entrepreneurs, and even less about gendered differences in this practice. Herein, we consider the case of final retailers in agricultural value chains and examine how male and female informal milk vendors from peri-urban Nairobi borrow and sell on credit, and how these experiences affect their businesses where there are few formal safeguards to ensure repayment. In 2017, we conducted 49 individual interviews, four key informant interviews, and six focus groups with men and women who were current or former milk vendors. A thematic analysis revealed that vendors sell on credit to appeal to customers, which may be advantageous when vendors need to rid themselves of milk before it spoils, regardless of gender. With few strategies to recoup costs from customers who fail to repay, however, failure to collect debt may cause default for vendors who acquired milk via informal borrowing. The consequences are likely more severe for women vendors, who generally have less capital to fall back on relative to men. Development organizations should identify gender-sensitive financial services that can help entrepreneurs maintain viable businesses despite the volatility of borrowing and selling on credit.
    Keywords: KENYA; EAST AFRICA; AFRICA SOUTH OF SAHARA; AFRICA; milk production; enterprises; credit; microenterprises; gender; agricultural value chains; informal sector; qualitative analysis
    Date: 2021
  20. By: Jean-Charles Hourcade; Dipak Dasgupta; F. Ghersi (CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École des Ponts ParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique)
    Abstract: In this paper, we examine how to trigger a wave of low-carbon investments compatible with the wellbelow 2°C target of the Paris Agreement in the current post-pandemic context of increasing private and public debt. We argue that one major obstacle to catalyzing global excess savings at sufficient scale and speed on climate mitigation, and to 'greening' economic recovery packages, lies in the upfront risks of low-carbon investment. We then explain why public guarantees should be the preferred risk-sharing instrument to overcome that obstacle. We outline the basic principles of a multilateral sovereign guarantee mechanism able to maximize the leverage effect of public funds and massively redirect global savings towards low-carbon investments, with the double benefit of bridging the infrastructure investment gap in developing countries and reducing tension between developed and developing countries around accelerated funding for low-carbon transitions. We carry out numerical simulations demonstrating how the use of guarantees from AAA-rated sovereigns, calibrated on an agreed-upon 'social value of carbon', is compatible with public-budget constraints of developed countries. In summary, the use of such guarantee mechanisms provides a new form of 'where flexibility', which could turn real-world heterogeneity into a source of reciprocal gains for both developed and developing countries, and contribute to meeting the USD 100 billion + pledge of the Paris Agreement. Key policy insights Catalyzing excess world savings through low-carbon investments (LCIs) would secure a safer and fairer economic recovery from the COVID-19 crisis and avoid locking developing countries into carbon-intensive pathways. Public policy instruments focused on creation of public guarantees can reduce the up-front financial risks associated with LCIs, mobilize private money and increase the leverage of public finance. A multi-sovereign guarantee mechanism would yield financial support from developed to developing countries in cash grant equivalent and equity inflows two to four times higher than the 'USD 100 billion and more' commitment of the Paris Agreement, and provide greater confidence in meeting this commitment equitably and effectively with benefits for all.
    Keywords: Climate finance,Public guarantees,De-risking,Low-carbon investment,Post-COVID recovery,100 billion + pledge
    Date: 2021
  21. By: Julia Anna Bingler (CER–ETH – Center of Economic Research at ETH Zurich, Switzerland); Chiara Colesanti Senni (Council on Economic Policies); Pierre Monnin (Council on Economic Policies)
    Abstract: Climate risks are now fully recognized as financial risks by asset managers, investors, central banks, and financial supervisors. Against this background, a rapidly growing number of market participants and financial authorities are exploring which metrics to use to capture climate risks, as well as to what extent the use of different metrics delivers heterogeneous results. To shed a light on these questions, we analyse a sample of 69 transition risk metrics delivered by 9 different climate transition risk providers and covering the 1,500 firms of the MSCI World index. Our findings show that convergence between metrics is significantly higher for the firms most exposed to transition risk. We also show that metrics with similar scenarios (i.e. horizon, temperature target and transition paths) tend to deliver more coherent risk assessments. Turning to the variables that might drive the outcome of the risk assessment, we find evidence that variables on metric's assumptions and scenario's characteristics are associated with changes in the estimated firms' transition risk. Our findings bear important implications for policy making and research. First, climate transition risk metrics, if applied by the majority of financial market participants in their risk assessment, might translate into relatively coherent market pricing signals for least and most exposed firms. Second, it would help the correct interpretation of metrics in financial markets if supervisory authorities defined a joint baseline approach to ensure basic comparability of disclosed metrics, and asked for detailed assumption documentations alongside the metrics. Third, researchers should start to justify the use of the specific climate risk metrics and interpret their findings in the light of the metric assumptions.
    Keywords: financial climate risks, corporate finance, climate risk metrics, climate transition risk, spearman's rank correlation, hierarchical cluster analysis, Ward's minimum variance criterion, Lasso regression analysis
    JEL: C83 D53 D81 G12 G32 Q54
    Date: 2021–09
  22. By: Weisser, Christoph; Lenel, Friederike; Lu, Yao; Kis-Katos, Krisztina; Kneib, Thomas
    Abstract: Access to electricity is typically the main benefit associated with solar panels, but in economically less developed countries, where access to electricity is still very limited, solar panel systems can also serve as means to generate additional income and to diversify income sources. We analyze high-frequency electricity usage and repayment data of around 70,000 households in Tanzania that purchased a solar panel system on credit, in order to (1) determine the extent to which solar panel systems are used for income generation, and (2) explore the link between the usage of the solar system for business purposes and the repayment of the customer credit that finances its purchase. Based on individual patterns of energy consumption within each day, we use XGBoost as a supervised machine learning model combined with labels from a customer survey on business usage to generate out-of-sample predic- tions of the daily likelihood that customers operate a business.We find a low average predicted business probability; yet there is considerable variation across households and over time. While the majority of households are predicted to use their system primarily for private consumption, our findings suggest that a substantial proportion uses it for income generation purposes occasionally. Our subsequent statistical analysis regresses the occurrence of individual credit delinquency within each month on the monthly average predicted probability of business-like electricity usage, relying on a time-dependent proportional hazards model. Our results show that customers with more business-like electricity usage patterns are significantly less likely to face repayment difficulties, suggesting that using the system to generate additional income can help to alleviate cash constraints and prevent default.
    Keywords: Rural electrification,Off-grid energy,High-frequency electricity usage data,Solar panels,Tanzania,Risk management,Credit default,Big Data,Supervised machinelearning,Time-dependent proportional hazards model,XGBoost
    Date: 2021

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