nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2023‒02‒06
27 papers chosen by
Georg Man

  1. Debt-Ridden Borrowers and Persistent Stagnation By Keiichiro KOBAYASHI; Daichi SHIRAI
  2. The Financing Structure of NonFinancial Corporations and MacroFinancial Implications in France By Stéphane Dees; Stefan Gebauer; Thomas Goncalves; Camille Thubin
  3. Repeated Transition Method and the Nonlinear Business Cycle with the Corporate Saving Glut By Lee, Hanbaek
  4. Nonlinear transmission of financial shocks: Some new evidence By Mario Forni; Luca Gambetti; Nicolò Maffei-Faccioli; Luca Sala
  5. The real effects of financial disruptions in a monetary economy By Miroslav Gabrovski; Athanasios Geromichalos; Lucas Herrenbrueck; Ioannis Kospentaris; Sukjoon Lee
  6. Stock Price Wealth Effects and Monetary Policy under Imperfect Knowledge By Ifrim, Adrian
  7. Loan-to-Value Shocks and Macroeconomic Stability By Emmanuel De Veirman
  8. Macro Effects of Formal Adoption of Inflation Targeting By Surjit Bhalla; Karan Bhasin; Mr. Prakash Loungani
  9. Income Distribution by Age Group and Productive Bubbles By Xavier Raurich; Thomas Seegmuller
  10. Unstable Prosperity: How Globalization Made the World Economy More Volatile By Enrique G. Mendoza; Vincenzo Quadrini
  11. Savings transition in Asia: Unity in diversity By Prema-chandra Athukorala; Wanissa Suanin
  12. From Multi- to National- and Back Again: Realizing the SDG Potential of Public Development Banks By Thomas MAROIS; Jacob STEWART; Régis MARODON
  13. Firm-Level Impact of Public Credit Guarantees By Ufuk Akcigit; Unal Seven; Ibrahim Yarba; Fatih Yilmaz
  14. Corporate Finance Facility and Resource Allocation: Research Trends and Developments during the Spread of COVID-19 By Kotone Yamada; Yukio Minoura; Jouchi Nakajima; Tomoyuki Yagi
  15. Dependency revisited: Commodities, commodity-related capital flows and growth models in emerging economies By Schedelik, Michael; Nölke, Andreas; May, Christian; Gomes, Alexandre
  16. The Dutch disease of the Euro Area peripheral member states By João Alcobia; Ricardo Cabral
  17. Information for Banking Efficiency in Africa: Evidence from Income Levels and Legal Origins By Asongu, Simplice; Odhiambo, Nicholas
  18. The role of the financial sector and governance in promoting formal entrepreneurship in the mena region By Rania S. Moaaz
  19. Household Leverage and Labor Market Outcomes : Evidence from a Macroprudential Mortgage Restriction By Gazi KabaÅŸ; Kasper Roszbach
  20. Student loans: Credit constraints and higher education in South Africa By Marc Gurgand; Thomas Mélonio; Adrien Lorenceau
  21. Financial inclusion, mobile money and regulatory architecture By Metzger, Martina; Were, Maureen; Pédussel Wu, Jennifer
  22. The Bank of Amsterdam and the limits of fiat money By Wilko Bolt; Jon Frost; Hyun Song Shin; Peter Wierts
  23. CBDC: Banking and Anonymity By Yuteng Cheng; Ryuichiro Izumi
  24. La Crise Climatique, La Sensibilité Macroéconomique et La Réponse des Envois de Fonds dans l’Afrique du Nord:Une Modélisation VAR en Panel By Hajer Habib
  25. Green Transmission: Monetary Policy in the Age of ESG By Patozi, A.
  26. Managerial and financial barriers during the green transition By De Haas, Ralph; Martin, Ralf; Muûls, Mirabelle; Schweiger, Helena
  27. Shaking up Foreign Finance: FDI in a Post-Disaster World By Robert Reinhardt

  1. By: Keiichiro KOBAYASHI; Daichi SHIRAI
    Abstract: Persistent stagnation often follows a financial crisis. We construct a model in which a debt buildup in the corporate sector can persistently depress the economy, even when there are no structural changes. We consider endogenous borrowing constraints on short-term and long-term debt. A firm is referred to as debt-ridden when its long-term debt is so large that it can never decrease even though the firm pays all income in each period to the lender. A debt-ridden firm continues inefficient production permanently, and the emergence of a substantial number of debt-ridden firms causes a persistent recession. Further, if the initial debt exceeds a certain threshold, the firm intentionally chooses to increase borrowing and, thus, becomes debt-ridden. We numerically show successive productivity shocks or a large wealth shock can generate debt-ridden firms. The relief of debt-ridden borrowers from excessive debt may be effective for economic recovery.
    Date: 2023–01
  2. By: Stéphane Dees; Stefan Gebauer; Thomas Goncalves; Camille Thubin
    Abstract: How does the corporate funding mix affect economic and financial stability in France? To address this question, we develop a model for the financing structure of French non-financial corporations (NFCs) and incorporate it in the Banque de France's semi-structural macroeconomic model (FR-BDF). We document that while on average more than half of external financing for French NFCs is provided by bank credit, the share of bond financing has increased markedly after the great Financial Crisis of 2008/2009. We then use the augmented model to simulate several macro-financial stress scenarios and show that the new macro-financial linkages imply a non-negligible financial accelerator effect that affects corporate investment decisions and matters for the transmission of monetary policy. In particular, corporate leverage plays a key role for investment, and we discuss the relative strength of shocks affecting the leverage ratio via corporate credit and equity.
    Keywords: Semi-Structural Models, Non-Financial Corporation Financing, Corporate Debt.
    JEL: E51 C32
    Date: 2022
  3. By: Lee, Hanbaek
    Abstract: This paper develops a novel methodology to globally solve nonlinear dynamic stochastic general equilibrium models with high accuracy. The algorithm is based on the ergodic theorem: if a simulated path of the aggregate shock is long enough, all the possible equilibrium allocations are realized, enabling a complete characterization of the rationally expected future outcomes at each point on the path. The algorithm is applied to a heterogeneous-firm business cycle model where firms hoard cash as a buffer stock. Using the model, I analyze the state-dependent shock sensitivity of consumption over corporate cash stocks and provide empirical evidence.
    Keywords: Nonlinear business cycle, heterogeneous agents, stochastic dynamic programming, monotone function, state dependence.
    JEL: C63 D21 E32
    Date: 2022–12
  4. By: Mario Forni; Luca Gambetti; Nicolò Maffei-Faccioli; Luca Sala
    Abstract: Financial shocks generate a protracted and quantitatively important effect on real economic activity and financial markets only if the shocks are both negative and large. Otherwise, their role is quite modest. Financial shocks have become more important for economic fluctuations after the 2000 and have contributed substantially to deepening the recessions of 2001 and 2008. The evidence is obtained using a new econometric procedure based on a Vector Moving Average representation that includes a nonlinear function of the financial shock.
    Keywords: SVAR, Financial shocks, Non-linearity, Asymmetry, Financial crisis
    JEL: C32 E32
    Date: 2022–03–17
  5. By: Miroslav Gabrovski (Department of Economics, University of Hawaii); Athanasios Geromichalos (Department of Economics, University of California, Davis); Lucas Herrenbrueck (Department of Economics, Simon Fraser University); Ioannis Kospentaris (Department of Economics, VCU School of Business); Sukjoon Lee (Department of Economics, New York University Shanghai)
    Abstract: A large literature in macroeconomics reaches the conclusion that disruptions in financial markets have large negative effects on output and (un)employment. Although seemingly diverse, papers in this literature share a common characteristic: they employ frameworks where money is not explicitly modeled. This paper argues that the omission of money may hinder a model’s ability to evaluate the real effects of financial disruptions, since it deprives agents of a payment instrument that they could have used to cope with the resulting liquidity disruption. In a carefully calibrated New-Monetarist model with frictional labor, product, and financial markets we show that output and unemployment respond very modestly to shocks in the ability of agents to trade in the financial market. Explicitly modeling money enables us to show that the size of the transmission mechanism between the financial market shock and the real economy is disciplined by the inflation level.
    Keywords: search frictions; unemployment; corporate bonds; money; liquidity; inflation
    JEL: E24 E31 E41 E44
    Date: 2023–01
  6. By: Ifrim, Adrian
    Abstract: Departures from full-information rational expectation models give rise to stock price wealth effects which introduce inefficient cyclical fluctuations in the economy. Waves of optimism/pessimism affect beliefs and asset prices which influence aggregate demand through expectation-driven wealth effects. Monetary policy can play an important role in eliminating the non-fundamental effects of belief-driven asset price cycle: reacting symmetrically and transparently to stock prices increases welfare significantly compared to flexible inflation targeting strategies. A quantitative model estimated on US data shows that increasing interest rates by 12 basis points for every 100% rise in stock prices accomplish this goal. Moreover, a nonlinear reaction to stock prices only when capital gains exceed 7% delivers similar efficiency gains.
    Keywords: monetary policy, wealth effects, learning, survey expectations, stock prices, animal spirits
    JEL: D84 E32 E44 E52
    Date: 2023
  7. By: Emmanuel De Veirman
    Abstract: This paper documents the macroeconomic effects of changes in downpayment re- quirements on mortgage loans in a model where investment is undertaken by collateral- constrained agents. I find that a permanent tightening in lending standards substan- tially lowers aggregate spending in the short run and permanently lowers house prices. These effects are much larger than in earlier findings from a model where unconstrained agents invest. Furthermore, I document that the amplification of macroeconomic shocks is much stronger when steady-state loan-to-value ratios are high. The loan-to-value shock itself is amplified to a greater extent when the loan-to-value ratio starts out at a higher level. In that sense, the effects of loan-to-value ratios on the economy are non-linear.
    Keywords: Collateral effect; financial accelerator
    JEL: D11 D50 D52 E21
    Date: 2023–01
  8. By: Surjit Bhalla; Karan Bhasin; Mr. Prakash Loungani
    Abstract: We examine the impact of formal adoption of inflation targeting (IT) on inflation, growth and anchoring of inflation expectations in advanced economies and emerging markets and developing economies (EMDEs). Our paper reports several findings relevant to assessing the success of IT regimes. We find that while the early adopters of IT (pre-2000) all saw declines in inflation rates following adoption, IT adopters since then have enjoyed such success in only about half the cases. Since there is not much difference, on average, between IT and non-IT countries in mean inflation, inflation volatility and the extent of inflation anchoring, it is not easy to sort out what role IT has played in ensuring good outcomes; in particular, we cannot rule out the possibility that the success of IT may be due to ‘regression to the mean’. Our country-level analysis—using the Synthetic Control Method (SCM) to compare outcomes in IT countries to a synthetic cohort—shows that IT adoption delivers significant inflation gains in about a third of the cases. At the same time, we also find limited support for the concern that adoption of IT systematically leads to poorer growth outcomes. At a time when central banks are struggling to keep inflation in check, our results suggest that the belief that IT adoption will be sufficient to achieve this goal cannot be taken for granted.
    Keywords: Inflation targeting; Inflation expectations; Inflation forecasts
    Date: 2023–01–13
  9. By: Xavier Raurich (University of Barcelona); Thomas Seegmuller (AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique)
    Abstract: The aim of this paper is to study the role of the distribution of income by age group on the existence of speculative bubbles. A crucial question is whether this distribution may promote a bubble associated to a larger level of capital, that is a productive bubble. We address these issues in an overlapping generations model where agents live three periods and productive investment done in the first period of life is an illiquid investment whose return occurs in the following two periods. A bubble is a liquid speculative investment that facilitates intertemporal consumption smoothing. We show that the distribution of income by age group determines both the existence and the effect of bubbles on aggregate production. We also show that fiscal policy, by changing the distribution of income, may facilitate or prevent the existence of bubbles and may also modify the effect that bubbles have on aggregate production.
    Keywords: Bubble, Efficiency, Income Distribution, Overlapping Generations
    Date: 2022–04
  10. By: Enrique G. Mendoza; Vincenzo Quadrini
    Abstract: The sharp, secular decline in the world real interest rate of the past thirty years suggests that the surge in global demand for financial assets outpaced the growth in their supply. We argue that this phenomenon was driven by: (i) faster growth in emerging markets, (ii) changes in the financial structure of both emerging and advanced economies, and (iii) changes in demand and supply of public debt issued by advanced economies. We then show that the low-interest-rate environment made the world economy more vulnerable to financial crises. These findings are the quantitative predictions of a two-region model in which privately-issued financial assets (i.e., inside money) provide productive services but can be defaulted on.
    JEL: F34 F36 F62 F65
    Date: 2023–01
  11. By: Prema-chandra Athukorala; Wanissa Suanin
    Abstract: This paper examines the national savings behaviour in the process of economic growth through a comparative analysis of countries in developing Asia from a historical perspective. Developing Asia provides an ideal laboratory for the study with considerable differences in the savings behaviour among countries and over time within individual countries, notwithstanding the ‘model saver’ image based on the average savings rate. The empirical analysis distinguishes between private and government savings rates, with specific emphasis on the former. The results of the empirical analysis are consistent with the view of ‘virtuous circle’ between growth and savings, with growth initiating the savings transition. No evidence to suggest that a prior phase of promoting savings through specific policy initiatives is needed to initiate the process of growth and structural transformation. The private savings rate is associated positively with per capita gross domestic product, export orientation, and foreign resource inflows and negatively with the young dependency ratio of the population and domestic credit availability.
    Keywords: developing Asia, savings, investment, life cycle model, export-led growth
    JEL: D15 E21 O47 O53
    Date: 2023
  12. By: Thomas MAROIS; Jacob STEWART; Régis MARODON
    Abstract: Public multilateral (MDBs) and national development banks (NDBs) are already working to advance the 2030 Sustainable Development Goals (SDGs).But can they do more to help deliver finance at the right pace and scale and on the terms appropriate for catalyzing global green and just transitions? What potential roles might enhanced cooperation between multilateral and national development banks play in achieving green and just transitions?This paper contributes to our understanding of the potential of public development banks by mapping out the inter-relations between nine MDBs and select NDBs in four regions. The analysis finds that MDBs are lending to NDBs in their regions, but unevenly so; that MDB reporting of cooperation with NDBs is uneven; that MDBs see multiple barriers to lending to NDBs; and that, with a few exceptions, MDBs are not aligning or tracking SDG financing systematically.
    JEL: Q
    Date: 2023–01–12
  13. By: Ufuk Akcigit (University of Chicago, CEPR, and NBER, United States); Unal Seven (Central Bank of the Republic of Türkiye); Ibrahim Yarba (Central Bank of the Republic of Türkiye); Fatih Yilmaz (Faculté des sciences économiques et de gestion de Tunis, Université El-Manar-Tunisie Title: Firm-Level Impact of Public Credit Guarantees)
    Abstract: This paper studies the firm-level short-term impact of one of the world’s largest credit guarantee programs recently implemented in Türkiye. Using a combination of firm-level administrative databases of the tax registry, credit registry, and the credit guarantee fund (CGF) registry, we analyze the characteristics of the CGF-supported firms and the program’s impact on their employment, sales, and credit default probability. We find that the CGF program on average had a positive impact on the performance of treated firms. The CGF-supported firms were able to increase their employment by 17 percent and sales by 70 percent while these firms reduced their credit default probability by 0.6 percentage point relative to their matched-control group. Evaluating our estimation results at variable averages shows that every 1 million TL credit generated via the CGF program preserved 2.7 extra employment and stimulated about 3 million TL in sales. We also observe an overall increase in firm indebtedness, which may adversely affect firms’ long-term financial health. Moreover, our findings reveal that the program impact is heterogeneous across firm size and sector groups. Using this heterogeneity, we perform counterfactual policy exercises indicating that redesigning the program with such priorities can bring substantial efficiency gains.
    Date: 2022–12–20
  14. By: Kotone Yamada (Bank of Japan); Yukio Minoura (Bank of Japan); Jouchi Nakajima (Hitotsubashi University); Tomoyuki Yagi (Bank of Japan)
    Abstract: Since the outbreak of COVID-19, governments and central banks in major countries have implemented large-scale corporate finance facilities. While a series of policy actions seemingly have served well to rein in bankruptcies in the short run, more than a few have remarked that the facility measures could hamper business dynamics and distort resource allocation in the medium to long run. Based on these discussions, this paper provides a literature survey of existing studies on the effects of corporate facility measures of banks and governments on resource allocation in the economy. It mainly focuses on Japan after the collapse of its bubble economy, European countries after the global financial crisis and the sovereign debt crises, China under debt expansion, and developed countries during the spread of COVID-19. We also identify so-called "zombie firms, " which survive with banks' and governments' support despite performing poorly without the prospect of recovery, using firms' financial data. We set the criteria of the zombie firms by arranging methodologies proposed by the existing studies. The analysis shows that the number of zombie firms surged after the collapse of the bubble economy in the early 1990s in Japan. It decreased in the early 2000s and remained relatively lower in recent years for both large and small-and-medium enterprises. At least based on the currently available data in fiscal 2020 after the spread of COVID-19, we do not detect a problematic growth in the number of zombie firms as in the 1990s. Still, we need to be cautious about the development of zombie firms because we have data constraints on the recent data.
    Keywords: Business dynamics; Resource allocation; Zombie firms; COVID-19
    JEL: D22 D24 D30
    Date: 2023–01–20
  15. By: Schedelik, Michael; Nölke, Andreas; May, Christian; Gomes, Alexandre
    Abstract: The growth model perspective has provided avenues for bridging Comparative and International Political Economy, mainly with regard to the global financial crisis and developments within the Eurozone. This article aims to contribute to this endeavor by highlighting the joint effects of capital flows and commodity price swings on growth models in emerging capitalist economies. While the literature on dependent financialization has primarily focused on debt-led growth in the Global South, we spell out the negative implications of commodity-based export-led growth. To this end, we first present a stylized depiction of commodity dependence and provide descriptive statistical evidence of its global prevalence. Subsequently, we trace the co-movement of capital flows to emerging economies and commodity prices. We argue that this 'commodity-finance nexus' reinforces the pro-cyclical nature of commodity-based growth, financial volatility, and the vulnerability to global boombust-cycles. Furthermore, we demonstrate that the conventional method for establishing growth models by calculating the relative contributions to growth is ill-suited to capture the commodity-based export-led growth model of highly commodity-dependent economies. Finally, we identify commodity price movements and fiscal policies as major drivers of growth, with an important role for domestic politics as an intervening variable.
    Keywords: Commodity prices, capital flows, dependent financialization, growth models, emerging economies, boom-bust-cycles, export-led growth, fiscal policy, dependency
    JEL: O13 O47 Q33
    Date: 2022
  16. By: João Alcobia; Ricardo Cabral
    Abstract: This paper analyzes explanations identified in the literature for the subpar economic performance of the so-called peripheral member states of the Euro Area since the mid-1990s. It argues that a key factor was a Dutch disease-like transmission mechanism, as the adoption of the euro led to a capital inflow shock. This resulted in a structural shift in the productive structure of the peripheral economies away from technologically advanced manufactured goods, which are characterized by higher productivity growth. As a consequence, the peripheral member states specialized in non-tradable sectors, and in low-technology and labor-intensive tradable goods sectors, which largely explains the peripherals’ low economic growth, low productivity growth, and growing macroeconomic imbalances.
    Keywords: Financial Dutch disease; peripheral member states of the Euro Area; non-price competitiveness; Euro Area architecture
    JEL: O11 O14 O20 O41 O52 E12 F15
    Date: 2023–01
  17. By: Asongu, Simplice; Odhiambo, Nicholas
    Abstract: The study assesses how information sharing through mobile phones affects banking system efficiency in Africa with particular emphasis on income levels (middle-income versus low-income countries) and legal origins (English Common law versus French Civil law countries). The focus is on 53 African countries with data for the period 1996-2019, and the empirical evidence is based on Quantile regressions which enable the study to assess the nexus throughout the conditional distribution of banking system efficiency. The following findings are established: (i) mobile phone penetration promotes banking system efficiency in the 25th quantile and the median of banking system efficiency in low-income countries, while for middle-income countries, it is significant exclusively in the bottom quantile (i.e., 10th quantile). (ii) Except for the highest (i.e., 90th) quantile in which the effect of the mobile phone is not significant in English Common law countries, the impact is significant throughout the conditional distribution of banking system efficiency in Common law countries. (iii) As for French Civil law countries, the nexus is only significant in the median and highest (i.e., 90th) quantile of the conditional distribution of banking system efficiency. Policy implications are discussed.
    Keywords: Allocation efficiency; Information asymmetry; Mobile phones
    Date: 2022–12
  18. By: Rania S. Moaaz (Al-Ahram Canadian University)
    Abstract: Formal entrepreneurship is a worldwide phenomenon that has not received enough attention from scholars in the Middle East and North Africa (MENA) economies. This study investigates the impact of governance quality and financial development on formal entrepreneurship in nine MENA economies. The study uses a panel data analysis via a twostage least squares (2SLS) estimation for the period 2010-18, as well as a principal component analysis to generate a composite governance index that captures all six dimensions of the governance indicators. The study concludes that governance and financial development have a positive and statistically significant impact on formal entrepreneurship. However, other statistically significant explanatory variables were found to negatively impact our dependent variable in MENA economies, which proves that the development of formal entrepreneurship is a multi-dimensional process that involves institutional quality, sound macroeconomic policies, adequate infrastructure, a stable currency regime, and a fair judicial system, among other factors.
    Date: 2022–12–20
  19. By: Gazi KabaÅŸ; Kasper Roszbach
    Abstract: Does household leverage matter for worker job search, matching in the labor market, and wages? Theoretically, household leverage can have opposing effects on the labor market through debt-overhang and liquidity constraint channels. To test which channel dominates empirically, we exploit the introduction of a loan-to-value ratio restriction in Norway that exogenously reduces household leverage. Focusing on a sample of displaced workers who bought a house before losing their jobs due to mass layoffs, we find that a reduction in leverage raises the subsequent wages of these workers. Lower leverage enables workers to search longer, find jobs in higher-paying firms, and switch into new occupations and industries. The positive effect on wages is persistent and more pronounced for young and highly-educated workers who are more likely to benefit from the effects of a reduction in leverage on job search. Our results indicate that in addition to reducing financial stability risks, policies limiting household leverage can improve workers’ labor market outcomes.
    Keywords: Household Leverage, Household Debt, Job Displacement, Job Search, Macroprudential Policy
    JEL: E21 G21 G51 J21
    Date: 2021–11
  20. By: Marc Gurgand (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, J-PAL Europe - Abdul Latif Jameel Poverty Action Lab - Europe, PJSE - Paris-Jourdan Sciences Economiques - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique); Thomas Mélonio (AFD - Agence française de développement); Adrien Lorenceau (PSE - Paris School of Economics - UP1 - Université Paris 1 Panthéon-Sorbonne - ENS-PSL - École normale supérieure - Paris - PSL - Université Paris sciences et lettres - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)
    Date: 2022
  21. By: Metzger, Martina; Were, Maureen; Pédussel Wu, Jennifer
    Abstract: This paper discusses first the role of mobile money accounts to enhance financial inclusion towards vulnerable groups in developing countries in the light of recent empirical evidence. Second, we explore the role of regulation to address risks to consumers and the financial system arising from the use of mobile money accounts, a question which has not been thoroughly addressed in the literature. Although financial inclusion via mobile money accounts is increasing, the outreach to particular disadvantaged and poor groups is still limited. However, remittances and G2P payments might develop into game changers for financial inclusion of poor and vulnerable households. Many countries from Sub-Saharan Africa are outperformers in terms of use of mobile money accounts in comparison to developing countries in other regions. Strikingly, the empirical evidence suggests that the regulatory landscape was of strategic importance to unleash the developmental potential of mobile money networks and the crowding-in of formerly unbanked households. Regulation on consumer protection particularly is of strategic relevance for the lasting acceptance and smooth operation of mobile money services and sharing the benefits with disadvantaged and poor households. A lack of effective and convincing consumer safeguards in place could diminish the trust in mobile money services and subsequently their acceptance and use. As mobile money services involve similar risks as traditional banking services, similar rules should apply. In addition, there are risks arising from the particular technology for mobile money account holders and institutions of the financial sector, including DFS providers. To these risks belong hysteresis effects to the disadvantage of poor households due to the use of alternative data and biased algorithms as well as displacement effects in local traditional and digital financial services due to BigTech.
    Keywords: Mobile money, financial inclusion, regulation, consumer protection, digital financial services, Big Data, Sub-Saharan Africa
    JEL: D18 G18 G23 G51 G59
    Date: 2022
  22. By: Wilko Bolt; Jon Frost; Hyun Song Shin; Peter Wierts
    Abstract: Central banks can operate with negative equity, and many have done so in history without undermining trust in fiat money. However, there are limits. How negative can central bank equity be before fiat money loses credibility? We address this question using a global games approach motivated by the fall of the Bank of Amsterdam (1609–1820). We solve for the unique break point where negative equity and asset illiquidity renders fiat money worthless. We draw lessons on the role of fiscal support and central bank capital in sustaining trust in fiat money.
    Keywords: central banks, negative equity, fiat money, trust
    JEL: E42 E58 N13
    Date: 2023–01
  23. By: Yuteng Cheng (Bank of Canada); Ryuichiro Izumi (Department of Economics, Wesleyan University)
    Abstract: What is the optimal design of anonymity in a central bank digital currency (CBDC)? We examine this question in the context of bank lending by building a stylized model of anonymity in payment instruments. We specify the anonymity of payment instruments in two dimensions: The bank has no information about the entrepreneur’s investment, and the bank has less control over the entrepreneur’s profits. An instrument with higher anonymity may discourage the bank from lending, and thus, the entrepreneur strategically chooses payment instruments. Our analysis shows that introducing a CBDC with modest anonymity can improve welfare in one equilibrium, but can also destroy valuable information in bank lending, leading to inefficient lending in another equilibrium. Our results suggest that central banks should either make a CBDC highly anonymous or share CBDC data with banks to eliminate this bad equilibrium.
    Keywords: CBDC, Anonymity, Bank lending
    JEL: E42 E58 G28
    Date: 2023–01
  24. By: Hajer Habib (Faculté des sciences économiques et de gestion de Tunis, Université El-Manar-Tunisie)
    Abstract: Cet article vise à analyser empiriquement le rôle des envois de fonds des migrants dans l’allégement des oscillations du PIB réel induites par la variabilité météorologique détectée par les changements annuels moyens des précipitations et de la température subis par un ensemble des pays d’Afrique du nord entre 1980 et 2016. Nous utilisons un modèle autorégressif vectoriel sur des données de panel (PVAR) afin d’autoriser les interactions endogènes entre les variables du modèle et de contourner le problème d’une faible taille des séries en combinant les dimensions spatiale et temporelle. Nos résultats visent à montrer d'une part l'impact négatif de la variabilité météorologique interannuelle sur le PIB réel par habitant. Une légère diminution de ce dernier mais reste statistiquement significative de 0.2% et 0.13% lors des chocs respectivement des précipitations et de la température. Ceci est principalement dû à la stabilité du climat dans la région pendant les dernières décennies. D'autre part, les envois de fonds enregistrent une contribution à l’ordre de 3.7% aux fluctuations du PIB. Ces envois peuvent être utilisés comme un coussin sur la stabilité macroéconomique des pays affectés négativement par les conditions météorologiques. Ils se caractérisent par des schémas contracycliques qui augmentent l’adaptabilité et la résistance face aux aléas. En conséquence, les politiques futures doivent être plus rigoureusement focalisé sur les politiques d'adaptation et d'investir dans les technologies vertes qui atténuent les conséquences négatives de la météo annuelle et des changements climatiques à long terme.
    Date: 2022–12–20
  25. By: Patozi, A.
    Abstract: In this paper, I investigate how the Net-Zero transition affects the transmission of monetary policy. I first document an upward trend in environmental performance among US publicly listed companies over the last decade. Second, I evaluate the implications of firms becoming ‘greener’ for the transmission of monetary policy on asset prices, credit risk and firm-level investment. In response to a shock to monetary policy, ‘green’ firms (with high environmental scores) are significantly less impacted than their ‘brown’ counterparts (with lower environmental scores). The dependence of monetary policy responses on firm-level greenness is not explained by intrinsic differences in firms’ characteristics. Instead, I show that the heterogeneous response is the result of investors’ preferences for sustainable investing. Using a stylized theoretical framework, I illustrate how incorporating such preferences attenuates the semi-elasticity of ‘green’ asset prices with respect to monetary policy shocks.
    Keywords: Climate Change, ESG, Heterogeneity, Monetary Policy, Sustainable Investing
    JEL: E52 G12 G14 G30
    Date: 2023–01–18
  26. By: De Haas, Ralph; Martin, Ralf; Muûls, Mirabelle; Schweiger, Helena
    Abstract: We use data on 10, 852 firms across 22 emerging markets to analyse how credit constraints and deficient firm management inhibit corporate investment in green technologies. For identification, we exploit quasi-exogenous variation in local credit conditions. Our results indicate that both credit constraints and green managerial constraints slow down firm investment in more energy efficient and less polluting technologies. Complementary analysis of data from the European Pollutant Release and Transfer Register (E-PRTR) reveals the pollution impact of these constraints. We show that in areas where more firms are credit constrained and weakly managed, industrial facilities systematically emit more CO2 and other gases. This is corroborated by the finding that in areas where banks needed to deleverage more after the Global Financial Crisis, industrial facilities subsequently reduced their carbon emissions considerably less. On aggregate this kept CO2 emissions 5.6% above the level they would have been in the absence of credit constraints.
    Keywords: credit constraints; green management; CO2 emissions; energy efficiency
    JEL: L23 G32 L20 Q52 Q53
    Date: 2022–03–07
  27. By: Robert Reinhardt (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)
    Abstract: This study investigates which effect earthquakes have on the inflow of foreign direct investment (FDI) within a country from a temporal, spatial and sectoral dimension. It uses a dynamic difference-indifference model of physical disaster exposure in 416 Indonesian districts between 2003 and 2019 in order to quantify the impact on investment behavior from abroad. Drawing geolocated data from a variety of sources, the results indicate that FDI inflows are temporarily reduced of around 90% in the year after the disaster. In this case study, spatial effects play a subordinate role, yet earthquake shocks affecting upstream industries tend to have substantial negative effects. Manufacturing appears to be the most affected sector.
    Keywords: Foreign Direct Investment, Disasters, Risk, Economic Growth, Input-Output
    Date: 2022–12–20

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