nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2021‒11‒15
24 papers chosen by
Georg Man

  1. Financial Factors, Firm size and Firm Potential By Ferreira, M.; Haber, T.; Rörig, C.
  2. Long-run Unit Cost of Financial Intermediation in Japan (Japanese) By GUNJI Hiroshi; ONO Arito; SHIZUME Masato; UCHIDA Hirofumi; YASUDA Yukihiro
  3. Unravelling the Mysteries of Underdevelopment in Africa By Elvis Dze Achuo; Tii N. Nchofoung; Simplice A. Asongu; Gildas Dohba Dinga
  4. Working Paper 358 - The Colonial Origins of Banking Crisis in Africa By Lisa D. Cook; Linguère Mously Mbaye; Janet Gerson; Anthony Simpasa
  5. The relationship between government debt and economic growth in South Africa with specific reference to Eskom By Zondi, Philani; Robinson, Zurika
  6. Working Paper 356 - Eurobonds, debt sustainability and macroeconomic performance in Africa: Synthetic controlled experiments By Chuku Chuku; Mustafa Yasin Yenice
  7. Working Paper 355 - Public debt, Chinese loans and optimal exploration-extraction in Africa By Chuku Chuku; Lin Lang; King Yoong Lim
  8. Working Paper 354 - Taxation, Foreign Direct Investment and Spillover Effects in the Mining Sector By Seydou Coulibaly; Abdramane Camara
  10. China's FDI in Europe and Europe's Policy Response By Yang, Pyoung Seob; Lee, Cheol-Won; Na, Suyeob; Oh, Taehyun; Kim, Young Sun; Yoon, Hyung Jun; Gang, Yoo-Duk
  11. Financial Literacy and Consumer Financial Well-being in Ghana: Any Nexus with Economic Stability? By Matey, Juabin
  12. Failing Synergies Among Public Programs:the Economy-Wide Effects of One Rural Credit and Two Social Protection Programs Simultaneously Implemented in Southern Brazil By Specht, Gabriel; Nuppenau, Ernst-August; Domptail, Stephanie
  13. Liquidity, Capital Pledgeability and Inflation Redistribution By Paola Boel; Julian Diaz; Daria Finocchiaro
  14. Habits die hard: implications for bond and stock markets internationally By Nitschka, Thomas; Satkurunathan, Shajivan
  15. The asymmetric effects of monetary policy on stock price bubbles By Christophe Blot; Paul Hubert; Fabien Labondance
  16. A Model for Central Bank Digital Currencies: Implications for Bank Funding and Monetary Policy By Schiller, Jonathan; Gross, Jonas
  17. The simpler, the better: Measuring financial conditions for monetary policy and financial stability By Arrigoni, Simone; Bobasu, Alina; Venditti, Fabrizio
  18. Does Trade Credit Absorb Adverse Shocks? By TSURUTA Daisuke; UCHIDA Hirofumi
  19. Globally Consistent Creditor Protection, Reallocation, and Productivity By Bian, Bo
  20. Reporting Regulation and Corporate Innovation By Breuer, Matthias; Leuz, Christian; Vanhaverbeke, Steven
  21. The Death of a Regulator: Strict Supervision, Bank Lending and Business Activity By Granja, João; Leuz, Christian
  22. THE MORE THE BETTER? INFORMATION SHARING AND CREDIT RISK By Irina Iakimenko; Maria Semenova; Eugeny Zimin
  23. Dynamic Interdependence and Volatility Transmission from the American to the Brazilian Stock Market By Edson Z. Monte; Lucas B. Defanti
  24. A primer on green finance: From wishful thinking to marginal impact By Krahnen, Jan Pieter; Rocholl, Jörg; Thum, Marcel

  1. By: Ferreira, M.; Haber, T.; Rörig, C.
    Abstract: Using a unique dataset covering the universe of Portuguese firms and their credit situation we show that financially constrained firms are found across the entire firm size distribution, account for a larger total asset share compared to standard heterogeneous firms models, and exhibit a higher cyclical sensitivity, conditional on size. In light of these findings we reassess the importance of the firm distribution in shaping aggregate outcomes in the canonical model of heterogeneous firms with financial frictions. We augment the productivity process with ex-ante heterogeneity of firms, allowing us to match the distribution of constrained firms conditional on size. This, together with the fact that constrained firms have a higher capital elasticity, leads to up to four times larger aggregate fluctuations and capital misallocation.
    Keywords: Firm size, business cycle, financial accelerator
    JEL: E62 E22 E23
    Date: 2021–11–03
  2. By: GUNJI Hiroshi; ONO Arito; SHIZUME Masato; UCHIDA Hirofumi; YASUDA Yukihiro
    Abstract: We estimate the long-run unit cost of financial intermediation in Japan. Philippon (2015) and Bazot (2018a) respectively estimate the unit cost of financial intermediation in the US and Europe as the ratio of the financial industry income (numerator) to the financial industry output (denominator). To measure the financial industry income, we add several elements that are not included as the financial industry's value added in the System of National Accounts (SNA): net interest income and dividends from assets and liabilities other than loans and deposits, capital gains or losses from banks' securities portfolios, and credit costs associated with non-performing loans. We find that the unit cost of financial intermediation in Japan exhibits secular decline, which is not observed in the US and some European countries.
    Date: 2021–09
  3. By: Elvis Dze Achuo (University of Dschang, Cameroon); Tii N. Nchofoung (University of Dschang, Cameroon); Simplice A. Asongu (Yaoundé, Cameroon); Gildas Dohba Dinga (The University of Bamenda, Cameroon)
    Abstract: Achieving sustainable development has been the dream of every society across the globe especially sequel to the dawn of the industrial revolution. Thus, understanding the fundamental determinants of the socio-politico-economic development of every economy is of prime importance for investors, policymakers, development agencies and the society at large. It is in this light that this study sought to empirically examine the key factors that explain the socioeconomic development patterns in Africa. The Instrumental Variable Two Stage Least Squares (IV-2SLS) estimation technique is adopted for a panel of 38 African countries over the 1996-2019 period. The empirical findings reveal that financial development and human capital are development enhancing in Africa while external financial inflows are detrimental to economic development. In addition, when other specific macroeconomic and structural variables were introduced in the model, the results show that institutional quality through governance, natural resources abundance, and industrialisation all explain both the social and economic development dynamics. These results were specific to income group, export structures and level of development. Moreover, salient policy implications are discussed.
    Keywords: Underdevelopment, Financial development, Human capital, Institutional quality, Africa
    Date: 2021–01
  4. By: Lisa D. Cook (Michigan State University); Linguère Mously Mbaye (African Development Bank); Janet Gerson (University of Michigan); Anthony Simpasa (African Development Bank)
    Abstract: Could initial – colonial and early post-colonial – conditions explain episodes of systemic crisis in banking systems today? We exploit differences in ethnic concentration of initial ownership and management structure of Nigerian banks established during the colonial era to examine banking crisis and vulnerability of the financial system in contemporary Nigeria. Although banking institutions emerged from or were a reaction to British colonial banking structure, they pursued different practices with respect to ownership and management structure. To measure these initial conditions, we use historical data from the Nigerian banking system to construct an index of diversity in the initial ownership and management structure of each bank, where more diversity corresponds to a lower concentration of insiders, including family members, tribal affiliates, and political partners. We collected data from the “Blue Books”, British colonial banking records from 1887 to 1940, data on indigenous banks established during the colonial period from 1929 to 1960, and data on banks from 1960 to 2016. These data allow us to track the first Nigerian families, ethnic groups, and their associates who were part of the formation of the formal banking institutions in the country. We also collect individual and aggregate bank data from 2001 to 2016 collected from bank balance sheets, financial statements, annual reports, statistical bulletins, banking supervision reports, and other reports of the Central Bank of Nigeria and the Nigeria Deposit Insurance Corporation. Our estimates suggest that lower levels of diversity are associated with higher levels of risk for a bank. That is, lack of initial diversity in ownership and management of Nigerian banks may have played a role in the performance and fragility of the Nigerian banking system that lent itself to systemic crisis. Our findings are consistent with the broader recent literature that shows higher profit and stronger performance of more diverse firms relative to less diverse firms due to, for example, diversity-driven innovation and product development.
    Keywords: Banks, financial institutions, banking crisis, financial crisis, colonial economic history, African economic history, social networks, Africa JEL classification: G21, G32, N47, N27, O16
    Date: 2021–10–12
  5. By: Zondi, Philani; Robinson, Zurika
    Abstract: The increasing level of government debt continues to be one of the most contestable topics since the great recession due to its effect on growth; however, a consensus is yet to be achieved on the topic. The current study investigated the economic effects of deteriorating South African government debt for the period 1994 to 2019 with the application of the autoregressive distributed lag model by Pesaran et al. (1999), which generates efficient results in the presence of cointegration, yielding unbiased long-run estimates. In contrast to similar empirical studies, the analysis of Eskom?s output on growth was found to be crucial. The bounds test exhibited that the regressors were cointegrated in the long run. The results infer that in the short run, government debt has a positive but weak influence on the economic growth rate. Although negative in the long run, debt does not Granger-cause growth. The results also showed that Eskom?s output was negatively associated with economic growth in the long run and that government debt Granger-caused Eskom?s output level.
    Keywords: South Africa; Eskom; public debt; economic growth; ARDL and bound test
    Date: 2021–10
  6. By: Chuku Chuku (International Monetary Fund); Mustafa Yasin Yenice (International Monetary Fund)
    Abstract: There has been a strong wave of Eurobond issuances by Africa’s frontier market economies since the start of the century. But it is not clear how these issuances have affected economic performance. This paper uses synthetic control experiments to conduct comparative case study analysis to assess whether sovereign Eurobond issuances have had the expected impacts on economic growth, debt sustainability, and domestic capital markets as indicated in the issue prospectuses. We compare the evolution of several indicators of economic performance, post-Eurobond issuance, against their synthetically constructed counterfactual trajectories in the absence of Eurobond issuances. The results show that sovereign Eurobond issuances have accelerated the evolution of per capita GDP in Africa. The magnitude is equivalent to about 10 percent on average, ten years following the intervention. Although most issuances were within 3 percent of GDP, they potentially led to a 13-percentage points acceleration in the debt-to-GDP ratios ten years after issuance, compared to the no-issuance counterfactual scenario. The evidence on the effect of Eurobond issuances on capital accumulation is inconclusive, although we find a strong positive correlation in selected countries. We did not find any systematic impact of Eurobond issuances on domestic capital market development. In sum, despite some unsuccessful cases, the effect of Eurobond issuances on Africa’s frontier market economies has been positive but susceptible to increasing debt vulnerabilities.
    Keywords: Eurobonds, debt sustainability, synthetic control experiments, Africa JEL classification: F34, G15
    Date: 2021–10–12
  7. By: Chuku Chuku (African Development Bank); Lin Lang (School of Social Sciences, University of Manchester); King Yoong Lim (Nottingham Business School, Nottingham Trent University)
    Abstract: TBased on an optimal oil explorationextraction model with public debts and Chinese loans, we examine analytically and empirically two theoretical propositions pertaining to the impacts of public debt and Chinese loan on economic and physical scarcity/abundance in Africa economies. First, despite a baseline independent relationship between public debt level and optimal operations, the level of public debts in an economy can have an adverse effect on the abundance measures if it breached the debt-sustainability threshold. Second, with alternative Chinese loans, the effect on optimal exploration-extraction is analytically ambiguous. To examine both propositions, we estimate endogenous binary-treatment regression models based on a panel data of 18 African economies over 2000-17. We find empirical support with regards to the adverse effect of public debt sustainability. Further, we find positive effect from Chinese loans to both abundance measures, indicating that the combined marginal benefits outweigh the marginal costs associated with the resourcecollateralized funding nature of these loans.
    Keywords: Africa, Chinese loans, Economic scarcity, Exploration and extraction, Non-renewable resources JEL classification: Q31, Q35, Q48
    Date: 2021–10–12
  8. By: Seydou Coulibaly (African Development Bank); Abdramane Camara (CERDI, Université Clermont Auvergne)
    Abstract: African countries generally cut corporate income tax (CIT) rates in the hopes of attracting foreign direct investment (FDI), but the effectiveness of tax rate reductions in attracting extractive industries FDI is controversial. This paper estimates the impact of CIT rates, as applied to mining companies, on FDI inflows to the gold and silver sectors of African economies. The estimation results indicate that the impact of mining CIT rate on the host country’s gold and silver FDI inflows is negative, but not statistically significant, at the conventional levels of significance. These results indicate that cuts in CIT rates applied to mining companies will not necessarily attract FDI to gold and silver projects. Moreover, we find a strategic complementarity in gold and silver FDI inflows between countries, suggesting that an increase in the host country’s gold and silver FDI inflows may stimulate FDI to gold and silver projects in neighboring countries. Furthermore, the results show that infrastructure, government stability and gold and silver reserves positively affect gold and silver FDI inflows. The main findings of the paper suggest that, instead of granting corporate tax incentives, governments may consider improving the quality of socioeconomic infrastructure, the availability of geological information, and promoting political and economic stability for attracting mining investments.
    Keywords: : FDI in gold and silver, mining corporate tax rate, panel data, spatial econometrics, Africa JEL classification: C23, E62, F21, H25, L72
    Date: 2021–10–12
  9. By: Fatima Farakhdust (National Research University Higher School of Economics)
    Abstract: The Asian region has become inhabited by few rising powers since late 20th century, triggering the debate on multipolarity and power transition in the region. On the one hand, shared historical past and sociocultural background may provide point of convergence and strengthen the existing stable state of affairs. On the other, comparable development challenges produce similar aims and strategies, fostering competition for scarce resources and leading to a regional zero-sum game. It ought to be especially true in the face of the rising China. Contemporary regional agenda of East and Southeast Asia, hence, is claimed to be substantially affected by Chinese power politics and ambitions, especially regarding mutually beneficial cooperation on development. Thus, discourse analysis of the respective context and agenda should be applied in order to study compatibility of national and regional goals. To do this, the author studies dominant approaches to Chinese regionalism and outcomes of economic policy focusing on the case of development finance. The analysis is performed using mixed research methods, including Foucauldian discourse, content analyses, descriptive statistics, and geographic mapping. The distribution of development aid and investments has highlighted that financial assistance might be politicized and used as a tool for subtle promotion of Chinese policy objectives, rather than as a driving force of collective regional development.
    Keywords: Chinese foreign policy, development, development finance, East and Southeast Asia, regionalism
    JEL: Z
    Date: 2021
    Abstract: China's investment in the European Union (EU) increased significantly during the European financial crisis, but has been on the decline in recent years. The surge of Chinese investment has raised concerns and demands for analysis on the negative effects it could have on the EU companies and industries. In this context, the present study aims to analyze the main characteristics of Chinese investment and M&A in Europe, major policy issues between the two sides, the EU's policy responses, and prospects of Chinese future investment in Eu-rope, going on to draw important lessons for Korea. To summarize the main characteristics of China's investment in Europe, the study found that the EU's share of China's overseas direct investment has continued to increase until recently. Second, investment in the Central and Eastern European Countries (CEECs) is gradually increasing, although it is still insignificant compared to the top five destinations in the EU: Netherlands, Sweden, Germany, Luxembourg and France. Third, China's investment in the EU is being made in pursuit of innovation in manufacturing and to acquire high-tech technologies. When it comes to China's M&A in Europe, the study found that the proportion of indirect China's M&As (via third countries (e.g. Hong Kong) or Chinese subsidiaries already established in Europe) was relatively higher than direct ones. Empirical factor analysis of investment also shows that China's investment in the EU is strongly motivated by the pursuit of strategic assets. Other factors such as institutional-level and regulatory variables are found to have no significant impact, or have an effect contrary to expectations. This suggests that China's investment in the EU is based on the Chinese government's growth strategy, and accompanies an element of national capitalism Today, It is highly expected that the COVID-19 pandemic will have a reorganizing effect on the global value chain (GVC) and Foreign investment regulation in the high-tech sector motivated by national security is emerging as a global issue as the US and the EU are tightening their control. As Korean companies are not free from the risk of falling under such regulations, a thorough and careful response is required. And for the Korean government, it is necessary to prepare legal and institutional measures regulating foreign investment in reference to the US and the EU.
    Keywords: China; FDI; EU; investment; M&A
    Date: 2021–10–31
  11. By: Matey, Juabin
    Abstract: Despite persistent efforts to deal with life's economic challenges, most Ghanaians are financially insecure, making the pursuit of lifelong goals more difficult. Given these realities, financial literacy and consumer financial stability appear viable strategies for promoting economic stability. This is because financial literacy can serve as a conduit for informed financial decisions at both the household and macroeconomic levels. A high human development index is an indication of a better welfare of the citizenry in the country. As a result, linking household decisions to broader policy outcomes is inevitable. In this work, efforts are made to establish a link between financial literacy and consumer financial stability and their relationships with macroeconomic stability. One relevant finding is that financial literacy has a significant positive association with economic stability as measured by citizens' welfare. This discovery has several ramifications for national financial literacy initiatives. There appears to be an insignificant relationship between consumer well-being and economic stability, although positive. Nonetheless, it demonstrates how a financially secure consumer can boost aggregate demand by spending more, impacting job creation and macroeconomic growth. The Probit-Regression method facilitated data analysis using a participant population of 960 across eight studied regions in Ghana. Reasoning from these findings, national governments should take advantage of the favourable relationship between financial literacy and consumer financial stability on one hand, and national economic stability on the other seriously, as aggregate consumption volatility is lower in countries with a high level of financial literacy, which is reflected in individual saving and investment behaviour. As such, policy efforts should consider the relationship between microeconomic actions and macroeconomic outcomes since the former influences the latter.
    Keywords: Financial literacy, Consumer financial stability, Economic stability, Household theory. Macroeconomic-level Microeconomic-level
    JEL: D1 D11 D12 D14 I3 I31
    Date: 2021–10–23
  12. By: Specht, Gabriel; Nuppenau, Ernst-August; Domptail, Stephanie
    Keywords: Agricultural and Food Policy, Agricultural Finance
    Date: 2021–08
  13. By: Paola Boel; Julian Diaz; Daria Finocchiaro
    Abstract: We study the redistributive effects of expected inflation in a microfounded monetary model with heterogeneous discount factors and collateral constraints. In equilibrium, this heterogeneity leads to borrowing and lending. Model assumptions also guarantee a tractable distribution of money and capital holdings. Several results emerge from our analysis. First, in this framework expected inflation is detrimental to capital accumulation. Second, expected inflation affects borrowing and lending when collateral constraints are present, thus also inducing redistributive effects through credit. Third, we find this channel to be regressive when we calibrate our model using US data. This is because the drop in borrowers’ capital caused by inflation is larger when capital is used as collateral.
    Keywords: money; heterogeneity; collateral constraint; welfare cost of inflation
    JEL: E40 E50
    Date: 2021–11–10
  14. By: Nitschka, Thomas; Satkurunathan, Shajivan
    JEL: G12
    Date: 2021
  15. By: Christophe Blot (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Paul Hubert (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po); Fabien Labondance (OFCE - Observatoire français des conjonctures économiques - Sciences Po - Sciences Po)
    Abstract: Is the effect of US monetary policy on stock price bubbles asymmetric? We use a range of measures of excessive stock price variations that are unrelated to business cycle fluctuations. We find that the effects of monetary policy are asymmetric so responses to restrictive and expansionary shocks must be differentiated. The effects of restrictive monetary policy are more powerful than the effects of expansionary policies. We also find evidence that the asymmetric effect of monetary policy is state-contingent and depends on monetary, credit and business cycles as well as stock price boom-bust dynamics.
    Keywords: Non-linearity,Equity,Booms and busts,Federal reserve
    Date: 2020–04–01
  16. By: Schiller, Jonathan; Gross, Jonas
    JEL: E42
    Date: 2021
  17. By: Arrigoni, Simone; Bobasu, Alina; Venditti, Fabrizio
    Abstract: In this paper we assess the merits of financial condition indices constructed using simple averages versus a more sophisticated alternative that uses factor models with time varying parameters. Our analysis is based on data for 18 advanced and emerging economies at a monthly frequency covering about 70% of the world's GDP.We assess the performance of these indicators based on their ability to capture tail risk for economic activity and to predict banking and currency crises. We find that averaging across the indicators of interest, using judgmental but intuitive weights, produces financial condition indices that are not inferior to, and actually perform better than, those constructed with more sophisticated statistical methods. An indicator that gives more weight to measures of financial stress, which we term WA-FSI, emerges as the best indicator for anticipating banking crisis, and is therefore better suited for financial stability.
    Keywords: financial conditions,quantile regressions,banking crises,SVARs,spillovers
    JEL: E32 E44 C11 C55
    Date: 2021
  18. By: TSURUTA Daisuke; UCHIDA Hirofumi
    Abstract: The aim of this paper is to examine whether trade credit contributes to absorbing adverse shocks to firms. If the relaxation of trade credit terms contributes to holding back the level of real activities, firms that postpone payment to suppliers would not reduce the amount of purchases when they encounter exogenous adverse shocks. We test this hypothesis by investigating the relation between the postponement of payment and the reduction in purchase amounts by using data of SMEs obtained from two corporate surveys after the Global Financial Crisis and the COVID-19 shocks. From our analysis, we do not find that firms that postponed the payment are less likely to reduce the amount of purchases, which indicates that trade credit does not contribute to absorbing adverse shocks.
    Date: 2021–11
  19. By: Bian, Bo
    Abstract: This paper documents that resource reallocation across firms is an important mechanism through which creditor rights affect real outcomes. I exploit the staggered adoption of an international convention that provides globally consistent strong creditor protection for aircraft finance. After this reform, country-level productivity in the aviation sector increases by 12%, driven mostly by across-firm reallocation. Productive airlines borrow more, expand, and adopt new technology at the expense of unproductive ones. Such reallocation is facilitated by (i) easier and quicker asset redeployment; and (ii) the influx of foreign financiers offering innovative financial products to improve credit allocative efficiency. I further document an increase in competition and an improvement in the breadth and the quality of products available to consumers.
    Keywords: Creditor Rights,Allocative Effciency,Reallocation,Productivity and Growth,Law and Finance
    JEL: D22 D24 G32 G33 K12 K33 L11
    Date: 2020
  20. By: Breuer, Matthias; Leuz, Christian; Vanhaverbeke, Steven
    Abstract: We investigate the impact of reporting regulation on corporate innovation. Exploiting thresholds in Europe's regulation and a major enforcement reform in Germany, we find that forcing firms to publicly disclose their financial statements discourages innovative activities. Our evidence suggests that reporting regulation has significant real effects by imposing proprietary costs on innovative firms, which in turn diminish their incentives to innovate. At the industry level, positive information spillovers (e.g., to competitors, suppliers, and customers) appear insufficient to compensate the negative direct effect on the prevalence of innovative activity. The spillovers instead appear to concentrate innovation among a few large firms in a given industry. Thus, financial reporting regulation has important aggregate and distributional effects on corporate innovation.
    Keywords: Financial Reporting,Disclosure,Regulation,Innovation,Patents,Growth
    JEL: K22 L51 M41 M42 M48 O43 O47
    Date: 2020
  21. By: Granja, João; Leuz, Christian
    Abstract: An important question in banking is how strict supervision affects bank lending and in turn local business activity. Supervisors forcing banks to recognize losses could choke off lending and amplify local economic woes. But stricter supervision could also change how banks assess and manage loans. Estimating such effects is challenging. We exploit the extinction of the thrift regulator (OTS) to analyze economic links between strict supervision, bank lending and business activity. We first show that the OTS replacement indeed resulted in stricter supervision of former OTS banks. Next, we analyze the ensuing lending effects. We show that former OTS banks increase small business lending by roughly 10 percent. This increase is concentrated in well-capitalized banks, those more affected by the new regime, and cannot be fully explained by a reallocation from mortgage to small business lending after the crisis. These findings suggest that stricter supervision operates not only through capital but can also correct deficiencies in bank management and lending practices, leading to more lending and a reallocation of loans.
    Keywords: Bank regulation,Enforcement,Loan losses,Aggregate outcomes,Prudential oversight,Business lending,Entry and exit
    JEL: E44 E51 G21 G28 G31 G38 K22 K23 L51 M41 M48
    Date: 2020
  22. By: Irina Iakimenko (National Research University Higher School of Economics); Maria Semenova (National Research University Higher School of Economics); Eugeny Zimin (National Research University Higher School of Economics)
    Abstract: Correctly estimating borrower credit risk is a task of particular and growing importance for banks all around the globe. Formal information sharing mechanisms are aimed to reduce information asymmetry in the credit markets and to enhance the precision of those estimates. In the literature, however, whether more, and more detailed, borrower information shared by credit bureaus and credit registries is always associated with higher quality bank credit portfolios and lower credit risk is not completely unambiguous. More credit information disclosed by information intermediaries tends to result in a weaker disciplinary effect of credit history, which means higher credit risk. The accuracy of assessing the creditworthiness of borrowers grows due to an increase in the predictive power of scoring models, which leads to a reduction in credit risk. In this paper, we make a first attempt to examine the nonlinearity of this effect. We study the relationship between the depth of credit information disclosed and the stability of the banking sector in terms of credit risk. Based on data on 80 countries for 2004–2015, we show that the relationship between disclosure and credit risk is non-linear: we observe the lowest levels of credit risk at the minimum and maximum levels of disclosure. We analyze the influence of national institutional quality and financial development on the nature of the relationship. We show that credit risk decreases with increasing amounts of disclosure by credit bureaus and credit registers in well-developed financial markets and in a high-quality institutional environment.
    Keywords: Credit risk, Credit bureau, Credit registry, Bank, Information sharing
    JEL: G21 G28
    Date: 2021
  23. By: Edson Z. Monte; Lucas B. Defanti
    Abstract: The main aim of this paper is to verify the dynamic interdependence and transmission of volatility from the American (SP500) to the Brazilian stock market (IBOVESPA and sectoral indexes). Estimates were performed by GARCH/BEKK methodology, considering the period from January 2007 to December 2019. In the periods considered as “critical events†there was a significant increase in the conditional covariance between SP500 and Brazilian stock indexes (IBOVESPA and sector indices), which suggests for the hypothesis of financial contagion. The covariance increased more intensely and persistently during the so-called subprime crisis, one that had a major impact on the Brazilian economy, especially for the financial and industrial indexes. Furthermore, conditional variance estimates for Brazilian indexes revealed that that internal turmoil, whether economic or political, regardless of the international scenario (“critical events†), affected the volatility of the Brazilian stock market. These results have important implications regarding the future decisions of economic agents (politicians and investors), contributing to a better understanding of the behavior of the Brazilian stock market vis-à -vis the American stock market and the internal turbulences in the Brazilian economy, whether political or economic.
    Keywords: United States; Brazil; Stock Market; Volatility; GARCH-BEKK.
    JEL: G17 C32 C58
    Date: 2021–10–09
  24. By: Krahnen, Jan Pieter; Rocholl, Jörg; Thum, Marcel
    Abstract: We raise some critical points against a naïve interpretation of "green finance" products and strategies. These critical insights are the background against which we take a closer look at instruments and policies that might allow green finance to become more impactful. In particular, we focus on the role of a taxonomy and investor activism. We also describe the interaction of government policies with green finance practice - an aspect, which has been mostly neglected in policy debates but needs to be taken into account. Finally, the special case of green government bonds is discussed.
    Keywords: Green Finance,Climate Change,Sustainability,Taxonomy,ESG
    Date: 2021

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