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on Financial Development and Growth |
| By: | Bakari, Sayef; El Weriemmi, Malek |
| Abstract: | The aim of this investigation is to examine the nexus between domestic investment and economic growth in Arab countries. To attempt our goal, we used annual data for the period 1990 – 2020 and Vector Error Correction Model. Empirical analysis indicates that there is no relationship between domestic investment and economic growth in the long run. However, we find a bidirectional causality between domestic investment and economic growth in the short run. These results provide evidence that domestic investment is necessary in Arab countries’ economy and is presented as an engine of growth since they cause economic growth in the short term. But they are not carried out and treated with a solid and fair manner, which offer new insights into Arabe countries’ investment policy for promoting economic growth. |
| Keywords: | Domestic Investment, Economic Growth, VECM, Arab Countries. |
| JEL: | C13 E22 O40 O47 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:113077&r= |
| By: | Duque Garcia, Carlos Alberto |
| Abstract: | The objective of this paper is to identify the average cycles of the Colombian economy between 1967-2019 and to evaluate, through a time series analysis, investment, average rate of profit and mass of profits as their determinants. Our analytical framework is based on Marx's economic theory where the profitability of capital determines investment and, consequently, the dynamics of output. From the cyclical deviations of real GDP, estimated with the Hodrick-Prescott filter, six cycles with an average duration of 8.3 years were identified. Employing a Vector Autoregressive (VAR) model, and Granger causality tests, evidence was found in favor of Marx's hypothesis: both the rate of profit and the mass of profits determine investment while this, in turn, is co-determined by the business cycle. On the contrary, no evidence was found that investment determines either the rate of profit or the mass of profits. Thus, for the Colombian economy, the dynamics of the profitability of capital is the key to the business cycle. |
| Keywords: | Ciclo económico; Tasa de ganancia; Masa de beneficios; Modelos VAR; Cycles; Rate of profit; Mass of profits; VAR model |
| JEL: | B51 C32 E32 N16 |
| Date: | 2022–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:113272&r= |
| By: | Gregor Boehl; Felix Strobel |
| Abstract: | We use nonlinear Bayesian methods to evaluate the performance of financial frictions `a la Bernanke et al. (1999) during and after the Global Financial Crisis. We find that, despite the attention received in the literature, including these frictions in the canonical medium-scale DSGE model does not improve the model’s ability to explain macroeconomic dynamics in the US during the Great Recession. The reason is that in the estimated model with financial frictions, the firms’ leverage declines in response to the post-2008 collapse of investment, which in turn implies a narrowing of the credit spread. Hence, the estimated model predicts financial decelerator effects. Associated financial shocks play only a minor role for macroeconomic dynamics. Our estimates account for the binding effective lower bound on nominal interest rates, and confirm our findings independently for US and euro area data. |
| Keywords: | Financial Frictions, Great Recession, Business Cycles, Effective Lower Bound, Nonlinear Bayesian Estimation |
| JEL: | C11 C63 E31 E32 E44 |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:bon:boncrc:crctr224_2022_353&r= |
| By: | Lise Clain-Chamosset-Yvrard (Univ. Lyon, Université Lumière Lyon 2, GATE UMR 5824, F-69130 Ecully, France); Xavier Raurich (Departament d'Economia and CREB, Universitat de Barcelona); Thomas Seegmuller (Aix-Marseille Univ., CNRS, AMSE, Marseille France. 5 Boulevard Maurice Bourdet CS 50498 F-13205 Marseille cedex 1, France) |
| Abstract: | We provide a unified framework with demand for housing over the life cycle and financial frictions to analyze the existence and macroeconomic effects of rational housing bubbles. We distinguish a housing price bubble, defined as the difference between the housing market price and its fundamental value, from a housing demand bubble, which corresponds to a situation where a pure speculative housing demand exists. In an overlapping generation exchange economy, we show that no housing price bubble occurs. However, a housing demand bubble may occur, generating a boom in housing prices and a drop in the interest rate, when households face a binding borrowing constraint. Multiplicity of steady states and endogenous fluctuations can occur when credit market imperfections are moderate. These fluctuations involve transitions between equilibria with and without a housing demand bubble that generate large fluctuations in housing prices consistent with observed patterns. We finally extend the basic framework to a production economy and we show that a housing demand bubble increases the housing price, housing price to income ratio and economic growth. |
| Keywords: | Bubble; Housing; Self-fulfilling fluctuations |
| JEL: | E32 E44 R21 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:2207&r= |
| By: | Tihana Škrinjarić (Hrvatska narodna banka, Hrvatska); Maja Bukovšak (Hrvatska narodna banka, Hrvatska) |
| Abstract: | Protuciklički zaštitni sloj kapitala je jedan od ključnih instrumenata makrobonitetne politike, čija je namjena stvaranje dodatnog kapitala u razdobljima porasta cikličkih rizika, kako bi se njegovim otpuštanjem u krizi bankama osigurao prostor za nastavak nesmetanog kreditiranja, a u razdobljima koje joj prethode i posredno ublažilo prekomjerno kreditiranje. Njegova kalibracija započinje ocjenom kreditnog jaza, na način da se primjenom statističkih filtera određuje dugoročna kreditna aktivnost u odnosu na ekonomsku, kako bi se ocijenilo koliko trenutna kretanja odstupaju od ravnotežnih. Budući da se u praksi pojavio niz problema u primjeni takvih indikatora, ovim istraživanjem se razmatraju mogućnosti unapređenja procjene kreditnog jaza, koje se ocjenjuju uz primjenu kriterija kvalitete signaliziranja krize u povijesnom uzorku i stručnu procjenu. Glavni rezultati istraživanja upućuju da je potrebno zasebno filtrirati serije kredita i BDP-a uz pretpostavku da kreditni ciklus traje dulje u odnosu na gospodarski, te da se nepoznavanje točne duljine trajanja kreditnog ciklusa može premostiti promatranjem raspona mogućih kreditnih jazeva. Novi indikatori koji se predlažu u istraživanju su ranije signalizirali prethodnu globalnu financijsku krizu, te su stabilniji od prethodno korištenih specifičnih indikatora, čime se u realnom vremenu omogućava ranija i postepenija izgradnja protucikličkog zaštitnog sloja kapitala, manje podložna promjenama. |
| Keywords: | kreditni jaz, statistički filtri, makrobonitetna politika, sistemski rizik, protuciklički zaštitni sloj kapitala. |
| JEL: | C18 E32 E58 G01 G2 |
| Date: | 2022–06–14 |
| URL: | http://d.repec.org/n?u=RePEc:hnb:istraz:69&r= |
| By: | Gandelman, Néstor; Lluberas, Rodrigo |
| Abstract: | This paper presents harmonized indicators for household wealth, its components, and its determinants (including intergenerational mobility) in four Latin American countries (Chile, Colombia, Mexico and Uruguay), using Spain as a comparison benchmark. It is based on recently-available microdata from financial surveys. The paper analyzes the relationship between wealth indicators and sociodemographic characteristics of household heads (age, education, gender, marital status). |
| Keywords: | Desarrollo, Economía, Familia, Investigación socioeconómica, Políticas públicas, |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:dbl:dblwop:1904&r= |
| By: | Thierry Pairault (CECMC-CCJ - Centre d'études sur la Chine moderne et contemporaine - CCJ - Chine, Corée, Japon - EHESS - École des hautes études en sciences sociales - UPD7 - Université Paris Diderot - Paris 7 - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | This essay examines the impact and consequences of the promotion in Africa of China's experience with special economic zones (SEZs), how these zones could enable African countries to emulate the "Chinese miracle," and how they will serve China's ambition to pursue its economic goals. There is evidence that Chinese industrial parks in Africa, which China refers to as overseas economic and commercial cooperation zones (OECCZs), are not replicating the experience of SEZs in China. While an SEZ is a zone created by a host country on its own territory to attract foreign investors and to promote its own development, an OECCZ is an enclave designed by a Chinese company appointed by China to create a Chinese ecosystem in a host country's territory to accommodate Chinese companies. OECCZs are de facto subject to Chinese law and thus boost Chinese economic development. While China is forging such economic dependence of African countries on its own economy, it is also building a political clientele to serve its power assertion. |
| Keywords: | SEZ,China,Africa,ZES,Chine,Afrique |
| Date: | 2022–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-03660953&r= |
| By: | Tiamiyu, Kehinde A. |
| Abstract: | Abstract: This study has so far investigated the link between financial deepening and the development of the stock market over the period of 1981 and 2019 using Bound test conintegration ARDL approach on the ground that Nigeria's financial sector is still shallow and lacks the necessary liquidity and capital to bring about the required development of stock markets in Nigeria. The Bounds cointegration test revealed that cointegration existed among the variables under investigation. As a result, both the short and long term models were empirically examined. In the long run, the significant drivers of stock market development in Nigeria are financial development, domestic saving as a ratio of GDP, broad money diversification and GDP as they are all significant determinants in term of signs, magnitude and size. This result parallels the findings of Okeya and Dare (2019). However, from 1981 to 2019, a considerable inverse relationship was seen between broad money diversification and stock market performance, contrary to projections. By implication, Nigerian financial sector lacks financial diversification in the long run. However, the finding supports the popular consensus that money is neutral in the long run as stock market mirrors economic condition of the country it represents. Nonetheless, the short run counterpart of the regression model showed that stock market development follows adaptive expectation in Nigeria as its previous values significantly determined the present values. However, unlike in the long run, financial development indicator exerts negative influence to stock market and but only becomes significant after some lags. This therefore reinforces the reality that private sectors lacks enough liquidity, limiting its beneficial contribution to the development of the stock market in the near term. This, by inference, confirms the shallowness of the Nigerian financial sector, as it lacks sufficient liquidity in the short run. Besides, regardless of model considered be it long run or short run, total domestic saving ratio of GDP has been a good candidate driving stock market development in Nigeria. Based on this conclusion, the Central Bank of Nigeria (CBN) is enjoined to liberate interest rate so as to allow for more robust operations of financial sectors in Nigeria. |
| Keywords: | Financial Deepening; Financial Sector; Stock Market Development; ARDL; Nigeria |
| JEL: | E42 E44 G1 G12 G21 G24 |
| Date: | 2022–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:113224&r= |
| By: | Jean-Claude Kouladoum (University of Moundou, Chad); Muhamadu Awal Kindzeka Wirajing (University of Dschang, Cameroon); Tii N. Nchofoung (University of Dschang, Cameroon) |
| Abstract: | The study investigates the digital technology-financial inclusion nexus in 43 Sub-Saharan African countries between 2004 and 2019. The methodologies are the Generalized Method of Moment (GMM) to take care of double causality and country heterogeneity and IV-Tobit to take into account the limited range in the dependent variables. At all levels, digital technology measured by ICT indicators of the subscription rate of fixed and mobile telephone users, fixed broadband, internet users and a composite indicator of digitalization have positive significant effects on financial inclusion. A further robustness check is conducted by computing a composite indicator of financial inclusion to determine how it is affected by digital technology. The findings indicate that the rate of financial inclusion in Sub Saharan Africa rises with increasing digital technologies. There should be more investments in terms of promoting financial and technological infrastructures and also in the human capital sector since financial literacy can play an important part in promoting financial stability and inclusive finance in Africa. |
| Keywords: | Digital Technologies; Financial inclusion; Sub Saharan Africa |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:exs:wpaper:22/034&r= |
| By: | Oz Shy |
| Abstract: | Digital forms of payment are either not accessible or highly costly for unbanked consumers. This is because these forms of payment must be "funded" by some source of money, such as cash or a bank account. That creates the "last-mile" problem for the unbanked. This article examines various solutions for the funding problem that have been proposed in the literature, by regulators, and in bills submitted to Congress. |
| Keywords: | payments inclusion; financial inclusion; unbanked; digital currency; digital payments; central bank digital currency |
| JEL: | G28 G59 O33 O35 O38 |
| Date: | 2021–08–02 |
| URL: | http://d.repec.org/n?u=RePEc:fip:a00001:94158&r= |
| By: | Vasso Ioannidou (Centre for Economic Policy Research (CEPR)); Sheng Li (University of Zurich); Mrinal Mishra (University of Zurich - Department of Banking and Finance; Swiss Finance Institute); Steven Ongena (University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)) |
| Abstract: | Loans granted by banks to several entrepreneurs jointly, but for their own individual business and/or projects, are rarely studied. Analyzing 32 million month-loan observations from the Bolivian credit register, we establish that group loans comprise a sizeable part of the formal credit market, and that the most common group size equals two. Larger than individual loans, per borrower the group loans are smaller, with a longer duration and lower loan rates than individual loans. When borrowers are immature, they obtain credit through group loans. Later, involving personal guarantees, they are more likely to graduate to obtain credit through individual loans. |
| Keywords: | group loan, individual loan, micro credit |
| JEL: | G20 O16 |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2250&r= |
| By: | Dieci, Roberto; Schmitt, Noemi; Westerhoff, Frank H. |
| Abstract: | We develop an asset market participation model in which investors base their market entry decisions on the momentum, value and risk of the market. Despite our behavioral framework, the model's fundamental steady state is characterized by standard present-value relations between expected future payouts and the model-implied risk-adjusted return. We derive conditions under which endogenous asset market participation waves and co-evolving boom-bust cycles emerge. Moreover, we show that the asset market may display spontaneous, sharp and permanent downturns if investors react sensitively to risk, an outcome that goes hand in hand with low asset market participation rates and excess volatility. |
| Keywords: | boom-bust cycles,asset market participation waves,momentum, value and risk,herding behavior,feedback loops |
| JEL: | D84 G12 G41 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bamber:177&r= |
| By: | Merike Kukk; Alari Paulus; Nicolas Reigl |
| Abstract: | We assess empirically the relationship between credit market concentration and a novel country-level systemic risk indicator that has been developed at the European Central Bank. We find a weakly U-shaped relationship between market concentration and systemic risk for Western European countries, where very low and high levels of market concentration are associated with higher systemic risk. Cumulative estimates with dynamic models show that systemic risk has a persistent negative response to an increase in market concentration from low and median levels of concentration. Local projection estimates for the period preceding the global financial crisis also suggest that an increase in market concentration may have further added to systemic risk at a time when it was building up in countries with high banking concentration, demonstrating the complexity of the relationship between systemic risk and market concentration |
| Keywords: | systemic risk, financial stability, credit institutions, credit growth, market concentration |
| JEL: | G10 G21 E58 C22 C54 |
| Date: | 2022–03–24 |
| URL: | http://d.repec.org/n?u=RePEc:eea:boewps:wp2022-4&r= |
| By: | Raphael Auer; Marc Farag; Ulf Lewrick; Lovrenc Orazem; Markus Zoss |
| Abstract: | The phenomenal growth of cryptocurrencies raises important questions about their footprint on the financial system. What role are traditional financial intermediaries playing in cryptocurrency markets and what drives their engagement? Are new nodes emerging? We help answer these questions by leveraging a novel global supervisory database of banks' cryptocurrency exposures and by synthesising a range of complementary data sources for other types of institutions. We find that major banks' exposures currently remain at very modest levels. Across countries, higher innovation capacity, more advanced economic development, and greater financial inclusion are associated with a higher likelihood of banks taking on cryptocurrency exposures. We show that substantial activity is concentrated in lightly regulated crypto exchanges. This "shadow crypto financial system" serves both retail and institutional clients, such as dedicated investment funds. An uneven regulatory treatment across banks and crypto exchanges and significant data gaps suggest that a proactive, holistic and forward-looking approach to regulating and overseeing cryptocurrency markets is needed. It should focus on ensuring a more level playing field with regard to financial services provided by established financial institutions and intermediaries in the emerging crypto shadow financial system by introducing more stringent regulatory and supervisory oversight for the latter. |
| Keywords: | cryptocurrencies, decentralised finance, digital currencies, financial regulation, financial supervision, exchange, stablecoin, Bitcoin, Ethereum |
| JEL: | E42 G12 G21 G23 G28 O33 |
| Date: | 2022–05 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:1013&r= |
| By: | Anantha Divakaruni; Peter Zimmerman |
| Abstract: | The Lightning Network (LN) is a means of netting Bitcoin payments outside the blockchain. We find a significant association between LN adoption and reduced blockchain congestion, suggesting that the LN has helped improve the efficiency of Bitcoin as a means of payment. This improvement cannot be explained by other factors, such as changes in demand or the adoption of SegWit. We find mixed evidence on whether increased centralization in the Lightning Network has improved its efficiency. Our findings have implications for the future of cryptocurrencies as a means of payment and their environmental footprint. |
| Keywords: | bitcoin; blockchain; cryptocurrency; Lightning Network; payments |
| JEL: | E42 G10 |
| Date: | 2022–06–21 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwq:94363&r= |
| By: | Alessandro Bitetto (University of Pavia); Paola Cerchiello (University of Pavia); Charilaos Mertzanis (Abu Dhabi University) |
| Abstract: | In this paper, we present a fully data-driven statistical approach to building a synthetic index based on intrinsic information of the considered ecosystem, namely the financial one. Among the several methods made available in the literature, we propose the employment of a Dynamic Factor Model approach which allows us to fully and correctly compare observations at hand in space and time. We contribute to the research field by offering a statistically sound methodology which goes beyond state of the art techniques on dimension reduction, mainly based on Principal Component Analysis. We adopt a country by country fitting strategy to elicit the inner country specific characteristics and then we combine results together by means of a Vector Autoregressive and Kalman filter approach. To this aim, we analyze a set of 17 Financial Soundness Indicators provided by the International Monetary Fund ranging from 2006 to 2017 for 140 countries that span the globe, including both strong and developing economies. |
| Keywords: | Financial stability, Financing constraints, Data-driven, Dynamic Factor Model, State-space model, dimension reduction |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:pav:demwpp:demwp0207&r= |
| By: | International Monetary Fund |
| Abstract: | The Philippines is highly vulnerable to risks from climate change. The Philippines is categorized as one of the world’s most vulnerable countries to climate change and natural disasters, especially typhoons. Depending on where a severe typhoon hits the Philippines, it could potentially cause a systemic impact. All major cities and most of the population reside on the coastline, including the metropolitan Manila area where about 60 percent of economic activities take place. On the other hand, exposures to transition risk are concentrated in the coal-based power generation sector and the government’s licensing policy to build new power plants. |
| Date: | 2022–06–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2022/154&r= |
| By: | International Monetary Fund |
| Abstract: | The Philippines is a dynamic economy with a relatively smaller financial system than other Asian emerging market economies, dominated by banks. The total assets of the system amount to 126 percent of GDP. However, bank credit is just over 50 percent of GDP and mostly goes to nonfinancial corporates (NFCs). Banks are also tightly interlinked with NFCs through conglomerate ownerships. Access to finance for individuals is significantly lower than comparator systems, with only a third of adults having formal accounts. Non-bank financial institutions and capital markets—especially bond markets—are substantially less developed than banks. The Fintech ecosystem is nascent. |
| Date: | 2022–06–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2022/155&r= |
| By: | Tsang, Andrew |
| Abstract: | This paper applies causal machine learning methods to analyze the heterogeneous regional impacts of monetary policy in China. The method uncovers the heterogeneous regional impacts of different monetary policy stances on the provincial figures for real GDP growth, CPI inflation and loan growth compared to the national averages. The varying effects of expansionary and contractionary monetary policy phases on Chinese provinces are highlighted and explained. Subsequently, applying interpretable machine learning, the empirical results show that the credit channel is the main channel affecting the regional impacts of monetary policy. An imminent conclusion of the uneven provincial responses to the "one size fits all" monetary policy is that different policymakers should coordinate their efforts to search for the optimal fiscal and monetary policy mix. |
| Keywords: | China,monetary policy,regional heterogeneity,machine learning,shadow banking |
| JEL: | E52 C54 R11 E61 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:uhhwps:62&r= |