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on Financial Development and Growth |
| By: | Ozili, Peterson K; Oladipo, Olajide; Iorember, Paul |
| Abstract: | We investigate the effect of abnormal increase in credit supply on economic growth in Nigeria after controlling for the quality of the legal system, size of central bank asset, banking sector cost efficiency and bank insolvency risk. The abnormal increase in credit supply has a significant effect on economic growth. The abnormal increase in credit supply increases real GDP growth. The abnormal increase in credit supply decreases real GDP per capita during the global financial crisis. The abnormal increase in domestic credit to private sector has a significant positive effect on GDP per capita when there is strong legal system quality in Nigeria. In contrast, the abnormal increase in domestic credit to private sector has a significant negative effect on real GDP growth when there is strong legal system quality in Nigeria. The abnormal increase in credit supply is ineffective in increasing GDP per capita during crisis years. Policymakers should be cautious in pressuring financial institutions to release an abnormally large amount of credit into the economy particularly during financial crises. Rather, policymakers should encourage financial institutions to supply credit in a sustained manner – not in an abnormal manner – and in a way that supports growth. |
| Keywords: | Economic growth, Nigeria, credit supply, GDP growth rate, GDP per capita, abnormal credit supply, rule of law, ZSCORE, profitability, domestic credit to private sector, central bank asset. |
| JEL: | E51 E52 E58 G21 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:115988&r=fdg |
| By: | Nigo, Ayine R.S.; Gibogwe, Vincent |
| Abstract: | This study contributes to the literature on financial efficiency and growth. Given the increase in domestic credit, we show evidence of the effects of controlling institutional variables. The domestic credit is adverse, with an insignificant impact on per capita income growth. We make two observations from our findings. First, the negative but insignificant coefficients of the measure of bank credit across all model specifications seem to go against the supply-leading hypothesis, as financial development hurts economic growth; nevertheless, given that the impact is insignificant, this draws more into a neutrality hypothesis of no effect. Second, the findings are likely indications of the underdeveloped state of sub-Saharan Africa's financial system, implying that the present state of the financial systems is not robust enough to be a contributory drive towards enhancing economic growth in the region. However, all models have positive control variables (Inflation and gross fixed capital formation). All coefficients of interactions between credit and institutional quality are statistically insignificant (negative in four of six models). |
| Keywords: | foreign direct investment; economic growth; absorptive capacity; human capital; market liberalization. |
| JEL: | O19 |
| Date: | 2023–01–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:116041&r=fdg |
| By: | Razo-De-Anda, Jorge Omar; Cruz-Aké, Salvador; Venegas-Martínez, Francisco |
| Abstract: | This paper develops a stochastic dynamic general equilibrium model to assess the impact of Real Estate Investment Trust (REIT) in the growth rate of the real estate sector through direct investment in infrastructure. Based on the theoretical relationships that the model provides we show empirical evidence, through a quantile econometric analysis of time series, of the positive impact of the REITs in the construction sector. The growth in the construction sector comes from the demand for real estate by those trusts, which would lead to a price increase, promoting gross fixed capital formation, and increasing the value of output in the construction industry. |
| Keywords: | real estate investment trust, real estate markets, financial markets, general equilibrium. |
| JEL: | G10 G11 |
| Date: | 2022–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:115967&r=fdg |
| By: | Markus Leippold (University of Zurich; Swiss Finance Institute); Vincent Wolff (University of Zurich - Department of Banking and Finance) |
| Abstract: | Næs, Skjeltorp, and Ødegaard (2011) provide empirical evidence that stock market liquidity contains leading information about future economic activity. Their result suggests a rebalancing of small, increasingly illiquid to large stocks in recession times, an expression of “flight-to-quality”. We show that the relationship no longer holds due to the Fed’s accommodative monetary policy to buoy stock markets in crisis starting in the 1990s. Moreover, we document that liquidity dry-ups in small stocks no longer coincide with recessions. The Fed’s interventions mute the systematic link between monetary conditions and aggregate stock market liquidity’s well-established business cycle component. |
| Keywords: | Financial Markets and the Macroeconomy, Liquidity, Monetary Policy |
| JEL: | G10 E52 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2293&r=fdg |
| By: | Ali, Amjad |
| Abstract: | The present article has investigated the impact of financial liberalization and institutional quality on economic growth in Africa from 1996 to 2021. The estimated results of the study show that the availability of physical capital, total labor force participation, political stability, and effectiveness of the government have a positive and significant impact on the economic growth of the selected countries. The availability of physical capital and total labor force participation have a bidirectional causal relationship with economic growth. Financial liberalization has an insignificant impact on the economic growth of African countries. The study recommends that to enhance economic growth in Africa, the governments of the African countries should manage physical capital, raise the number of skilled labor force participation and promote institutional quality at the same time. Moreover, to get the true benefit of financial liberalization, African nations should control the negative effect of financial liberalization so that this economic growth can be achieved. |
| Keywords: | financial liberalization, economic growth, political stability, government effectiveness |
| JEL: | D72 F60 G18 O40 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:116101&r=fdg |
| By: | Ali, Amjad |
| Abstract: | The current study has examined the link between exchange rate volatility, financial stability, foreign debt, and economic growth in a few South Asian nations from 1985 to 2020. The findings show that labor force participation has a positive and significant link with economic growth. Financial stability has a positive and significant influence on economic growth. Physical capital has a positive and significant relationship with economic growth because South Asian countries have labor as a larger factor of production. Foreign debt has a negative and insignificant influence on the level of growth, whereas, exchange rate volatility has a positive and significant relationship with economic growth. The overall results conclude that exchange rate volatility, financial stability, foreign debt, physical capital availability, and labor force participation are playing important roles in determining economic growth in the case of selected South Asian countries. |
| Keywords: | Economic growth, Exchange rate volatility, Foreign debt, Financial stability |
| JEL: | F34 G01 O24 O40 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:116099&r=fdg |
| By: | del Río, Fernando; Lores, Francisco-Xavier |
| Abstract: | By conducting wedge-growth accounting, we assess the contribution of the economic forces (expressed as wedges in the equilibrium conditions of the neoclassical growth model) driving Spanish economic growth from 1850 to 2019. We find that declining investment and capital-efficiency wedges slowed down Spanish economic growth and downsized the labour share from 1850 to the First World War. The crisis of the 1930s (Great Depression and Civil War) was primarily driven by the decrease of the labour-efficiency wedge. The simultaneous increase of both efficiency wedges drove the Spanish economic miracle of the 1960s, which was preceded by a large increase in the investment wedge, resulting in a significant rise of the investment rate. From the mid-1970s, the declining capital-efficiency wedge was the primary force driving the fall of the labour share and the output growth slowdown. However, the labour wedge drove the medium-term fluctuations of output, labour, and investment. |
| Keywords: | Growth Accounting, Capital-Efficiency Wedge, Labour-Efficiency Wedge, Labour Wedge, Investment Wedge, Resource Constraint Wedge, Output, Labour Share, Hours Worked, Investment, Spanish economic growth, Wedge-growth accounting. |
| JEL: | E13 E17 E25 O41 O47 |
| Date: | 2023–01–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:116025&r=fdg |
| By: | Ms. Yu Shi; Karim Foda; Maryam Vaziri |
| Abstract: | This paper studies the relation between firms' access to finance, labor productivity and investment using Lithuanian firm-level data from 2000–2018. To do so, we construct a measure of financial constraints. We estimate that, given firm characteristics, removing these constraints can improve average productivity and investment of firms in Lithuania by 0.51 percent and 7.2 percent, respectively. Our results further suggest that policies targeting firm age and size together will be more effective in mitigating the impact of financial constraints as the relationship between firm age and size with financial constraints exhibits non-linearities. |
| Keywords: | Financial Constraints; Productivity; Investment; SMEs; Transition Economies; financing constraint; firm age; evidence from Lithuania; firm's age distribution; balance sheet information; Labor productivity; Aging; Financial statements; Global |
| Date: | 2022–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2022/249&r=fdg |
| By: | Jerónimo Carballo; Ignacio Marra De Artinano; Christian Volpe Martincus |
| Abstract: | While countries make use of a wide range of policies to attract multinational firms, identifying the effect of such policies is difficult. Combining firm-level data on both the location of these firms’ foreign affiliates and detailed service-specific information from Costa Rica’s investment promotion agency (IPA) over time, we find that IPA support significantly increases the probability that a multinational firm establishes its first affiliate in the country. Using existing theory and data, we estimate that the associated welfare gains are between 0.2%-0.4%. We then show that the effect is primarily driven by the resolution of information asymmetries. It is stronger for IPA information services and on multinational firms from countries and in sectors facing more severe information frictions. |
| Keywords: | Information Frictions, Investment Promotion, Multinational Production |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/355528&r=fdg |
| By: | Sergio Ocampo (University of Western Ontario); Juan Herreño (University of California San Diego) |
| Abstract: | We evaluate the aggregate effects of expansions of credit supply in environments where subsistence self-employment is prevalent. We extend a standard macro development model to include unemployment risk, which becomes a key driver of selection into self-employment. The model is consistent with the joint distribution of earnings and occupations, the reaction of wages to labor demand shocks, and the small effects of expansions in the supply of microloans on the earnings of the self-employed. We find that the elasticity of aggregate output to expansions in credit supply is proportional to the elasticity of individual earnings. This proportionality arises due to the muted effects of wages in general equilibrium in the presence of subsistence self-employment, and is not present in models without subsistence self-employment due to a larger wage response, and a larger crowding-out of private savings in response to a higher availability of credit. |
| Keywords: | Self-Employment, Unemployment, Development, Micro-Finance |
| JEL: | E44 O11 O16 O17 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:uwo:uwowop:20231&r=fdg |
| By: | Mrs. Nujin Suphaphiphat; Ms. Yu Shi |
| Abstract: | This paper documents the existence of medium-to-long term output losses following large crises using panel data that cover 192 countries from 1970 to 2015 and shows that the magnitudes of economic scarring depend on the nature of the shock, economic activity, and pre-crisis conditions. It also provides a thorough review of potential channels that can lead to scarring and presents novel empirical evidence on the significance of supply-side channels using cross-country sectoral-level data. Finally, the paper discusses policy implications based on the empirical findings. |
| Keywords: | Economic scarring; covid; pandemic; health crisis; systemic banking crisis; economic shock; hysteresis; growth; crises; scarring channels; employment; sectoral output loss; macroeconomic policy; Policy implication; panel data; impulse Response; scarring channel; Systemic crises; Human capital; Global |
| Date: | 2022–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2022/248&r=fdg |
| By: | Haas, Ralph$cde; Kirschenmann, Karolin; Schultz, Alison |
| Abstract: | We exploit proprietary information on severed correspondent banking relationships - due to the stricter enforcement of financial crime regulation - to assess how payment disruptions impede cross-border trade. Using firm-level export data from emerging Europe, we show that when local respondent banks lose access to correspondent banking services, their corporate borrowers start to export less. This trade decline occurs on both the extensive and intensive margins and firms do not substitute foregone exports with higher domestic sales. As a result, total firm revenues and employment shrink. These findings highlight an often overlooked function of global banks: providing the payment infrastructure that enables firms in less-developed countries to export to richer parts of the world. |
| Keywords: | Correspondent banking, payment infrastructure, global banks, international trade, anti-money laundering |
| JEL: | F14 F15 F36 G21 G28 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:22067&r=fdg |
| By: | Moritz Schularick (University of Bonn, Sciences Po, and Federal Reserve Bank of New York) |
| Abstract: | Corporate debt levels have risen sharply in advanced and emerging economies before and during the Covid pandemic. Will corporate debt overhang slow down the recovery from the pandemic? This paper studies the aftermath of corporate debt surges in long-run cross country data. History shows that the macro-economic aftermath of corporate debt booms is typically benign. Three caveats apply, but none of them currently raises alarm bells: (i) the sectoral composition of corporate debt must not be tilted towards investments in the non-tradable sectors; (ii) legal institutions for debt reorganization must work efficiently; (iii) in bank-based financial systems, stringent banking supervision must prevent the emergence or survival of zombie companies. |
| Date: | 2021–09 |
| URL: | http://d.repec.org/n?u=RePEc:ajk:ajkpbs:024&r=fdg |
| By: | Gadi Barlevy |
| Abstract: | This paper examines whether tasking central banks with leaning against asset booms can conflict with their existing mandates to stabilize goods prices and output. The paper embeds the Harrison and Kreps (1978) model of speculative booms in a monetary model based on Rocheteau, Weill, and Wong (2018). In the model, a speculation shock that generates an asset boom is associated with higher output but a lower price level, unlike aggregate demand shocks that raise both output and prices. This creates a trilemma for central banks in that contemporaneous monetary policy cannot simultaneously stabilize output, the price level, and real asset prices. Stabilizing all three requires alternative policies. |
| Date: | 2022–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:95174&r=fdg |
| By: | Mengxue Wang; Kubi Johnson; Ms. Rina Bhattacharya; Ms. Mwanza Nkusu |
| Abstract: | The paper evaluates the key drivers of fiscal crises in a sample of countries from all three income groups—advanced, emerging, and low-income countries, using fiscal crisis data recently developed by the IMF’s Fiscal Affairs Department. The empirical study focuses on three questions: (1) How does the composition of debtholders (domestic vs. foreign, resident vs. non-resident, or official vs. non-official) affect the probability of a fiscal crisis, after controlling for the level of public debt and other relevant variables?; (2) How does the development and size of the domestic financial sector affect the probability of a fiscal crisis?; and (3) How do changes in the debt level affect the probability of a fiscal crisis, for given compositions of the sovereign debt investor base and different levels of development and size of domestic financial markets? Our findings confirm the benefits of financial development, the danger of heavy reliance on a non-resident investor base, and also that emerging market economies have a lower debt carrying capacity compared to the full sample. |
| Keywords: | investor base; crisis data; debt carrying capacity; IV robustness; debt level; Financial sector development; Capital markets; Nonbank financial institutions; Global |
| Date: | 2022–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2022/240&r=fdg |
| By: | Kerem Tuzcuoglu |
| Abstract: | The Risk Amplification Macro Model (RAMM) is a new nonlinear two-country dynamic model that captures rare but severe adverse shocks. Tail risk arises from heightened financial stress abroad or in Canada that triggers a regime change with a negative feedback loop to the real economy. We rely on a combination of sign, zero and elasticity restrictions to identify structural shocks. The foreign block (global and US variables) impacts the domestic block (a large number of Canadian macrofinancial variables), but not vice-versa. Simulations suggest that tighter financial conditions in the United States can spill over to Canada, and a regime change in macrofinancial elasticities provides a good replication of economic downturns. The RAMM can be used to assess the financial stability implications of both domestic and foreign-originated risk scenarios. |
| Keywords: | Business fluctuations and cycles; Econometric and statistical methods; Financial stability; Monetary policy transmission |
| JEL: | C51 E37 E44 F44 |
| Date: | 2023 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocatr:123&r=fdg |
| By: | Brückbauer, Frank; Cezanne, Thibault |
| Abstract: | We build a textual score measuring the tone of bank earnings press release documents. We use this measure to define bank manager sentiment as the variation in the textual tone score which is orthogonal to bank-specific and macroeconomic fundamentals. Using this definition of sentiment, we present evidence on how bank managers' systematic overoptimism affects the amount of credit that they supply to the real sector. Our empirical evidence suggests that decisions on the volume of new loans partially depend on past realizations of economic fundamentals, implying that loan growth and contemporaneous economic fundamentals might be systematically disconnected. Furthermore, we show that over-optimism on the part of bank managers spills over to their equity investors, who seem to perceive banks with high bank manager sentiment as having a lower systemic risk. |
| Keywords: | sentiment, text data, extrapolation, loan growth, systemic risk |
| JEL: | G00 G10 G21 G41 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:22066&r=fdg |
| By: | Hardouvelis, Gikas A.; Vayanos, Dimitri |
| Abstract: | In this paper we review the Greek economic crisis focusing on the banking system. Banksovereign linkages were strong during the crisis: banks’ liquidity problems before the sovereign crisis spilled over to the real economy, and more importantly the sovereign’s default rendered all Greek banks insolvent because of their positions in government bonds. The Greek banking system was put back on its feet through a series of recapitalizations, following which industry concentration became the highest in Europe. Banks were slow to reduce non-performing loans (NPLs), which peaked at 48.9% of gross loans, because of their limited capital buffers. Government guarantees for securitizations were finally the key for NPLs to decline close to European averages. Banks’ capital buffers have improved through internal profitability but remain below European averages. Lending to the real economy is low but recovering, and banks’ exposure to the sovereign is again increasing. |
| JEL: | N0 F3 G3 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:117880&r=fdg |
| By: | Hui Chen; Winston Wei Dou; Hongye Guo; Yan Ji |
| Abstract: | Firms tend to compete more aggressively in financial distress; the intensified competition in turn reduces profit margins, pushing themselves further into distress and adversely affecting other firms. To study such feedback and contagion effects, we incorporate strategic competition into a dynamic model with long-term defaultable debt, which generates various peer interactions like predation and self-defense. The feedback effect imposes an additional source of financial distress costs incurred for raising leverage, which helps explain the negative profitability-leverage relation across industries. Owing to the contagion effect, in a decentralized equilibrium, leverage is excessively high from an industry perspective, compromising industry's financial stability. |
| JEL: | C73 D43 G12 L13 O33 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30841&r=fdg |
| By: | Emilia Garcia-Appendini (University of Zurich - Department of Banking and Finance); Frédéric Boissay (Bank for International Settlements (BIS)); 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: | Is monetary policy transmitted through markets for intermediate goods? Analyzing US data on corporate linkages, we document that the financial health of downstream and upstream firms plays a key role in monetary policy transmission. Our estimates suggest that contractionary changes in monetary conditions lead to reductions in demand and supply of financially constrained firms downstream and upstream. These reductions create bottlenecks inducing the "middle" linked firms to curtail their own activities. Overall these "bottleneck effects" coming from changes in demand and supply by constrained partners have a larger impact on a firm's operations than the firm's own financial conditions. |
| Keywords: | Monetary policy transmission, supply chain, aggregate demand, cost channel. |
| JEL: | E52 G32 |
| Date: | 2022–12 |
| URL: | http://d.repec.org/n?u=RePEc:chf:rpseri:rp2297&r=fdg |
| By: | Tito Nícias Teixeira da Silva Filho |
| Abstract: | Fintech has become one of the most popular topics among policymakers and experts. It usually comes with the qualifier “disruptive”. Thus, the hype is easy to understand: fintech would upend the financial system due to its disruptive nature, as it would allow financial services to be completed faster, cheaper, and more efficiently. Indeed, many have predicted that the remittances market was on the verge of being disrupted as remittances are considered too costly while remittance service providers inefficient, opaque, and outdated. Therefore, there seems to be no better setting for assessing the allegedly disruptive effects of fintech. Against that background, this paper investigates how those predictions have fared so far. Contrary to expectations, it found that instead of disrupting incumbents fintechs have increasingly been entangled with them. Therefore, not only there is no evidence of disruption, but it is unlikely to occur in the foreseeable future. Even so, the paper argues that fintechs play an important role in the remittances market. |
| Keywords: | fintech; disruptive; bitcoin; blockchain; mobile money; remtech; remittances costs; financial inclusion; innovation. |
| Date: | 2022–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2022/233&r=fdg |
| By: | Ms. Alina Carare; Mr. Yorbol Yakhshilikov; Metodij Hadzi-Vaskov; Dmitry Vasilyev; Lavinia Franco; Justin Lesniak |
| Abstract: | This paper investigates factors that predict variation in digital and non-digital remittance fees over time and across countries, exploring differences between CAPDR and other regions. The paper fills a void in the literature on how country- and corridor-specific factors relate to remittance fees at different levels of digitalization of the transaction mode. It also complements stylized facts and regression analysis with a survey analysis of the CAPDR authorities’ views on the latest developments, possibilities, and risks related to digital remittances with a view to gauging the authorities’ potential role in further reducing the cost of cross-border payments more generally and remittances fees in particular. The paper finds a clear trend of declining remittance fees across countries and at any level of digitalization, albeit they remain higher for CAPDR countries relative to non-CAPDR countries. More competition, financial and digital development in receiving countries—such as debit/credit card ownership or bank branch penetration—are associated with lower remittance fees, especially in CAPDR. The surveyed authorities actively explore the use of digital money to advance domestic payment systems, expedite financial inclusion, and lower remittances fees, yet see considerable risks, especially for preserving monetary sovereignty in CAPDR. |
| Keywords: | Digital money; cryptocurrency; stablecoin; remittances |
| Date: | 2022–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2022/238&r=fdg |
| By: | Kiichi Tokuoka; Maria Atamanchuk |
| Abstract: | In Armenia, both external and domestic financing face challenges. Armenia’s share of inward foreign direct investment (FDI) in private external financing has declined significantly over the past decade. Access to domestic finance in Armenia is also moderate and masks important disparities. Against this background, this paper analyses the determinants of inward FDI and examines the impediments to increasing access to domestic finance. The paper confirms empirically that governance-related structural factors have a significant impact on inward FDI. Similar structural factors, informality and poor accounting practices are reported among major challenges for increasing access to finance for firms in Armenia. This paper finds that to improve financing in Armenia include: implementing structural reforms to improve the business environment, maintaining prudent macroeconomic policies, strengthening financial reporting, and improving financial inclusion through reduced informality in the economy. |
| Keywords: | Inward FDI; access to finance; financial inclusion |
| Date: | 2023–01–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2023/004&r=fdg |
| By: | Marwa Kerdouci (Université 08 mai 45 Guelma [Algérie]); Assia Saadane (Université 08 mai 45 Guelma [Algérie]) |
| Abstract: | This study aims to highlight the initiatives undertaken by fintech companies in Côte d'Ivoire to access and use financial services, including by promoting financial inclusion. The study focused primarily on mobile money accounts and how they have already improved financial inclusion in Côte d'Ivoire, drawing on the analytical descriptive approach. The study found a dynamic ecosystem of players from different sectors, but access to finance remains the most difficult. On the other hand, Côte d'Ivoire is an emerging fintech platform, driven by the rapid adoption of « mobile money », where it has witnessed strong investor enthusiasm for digital finance, driven by favourable factors such as young people in the population, increasing the spread of smartphones, high-speed Internet and expanding populations without bank accounts. |
| Keywords: | fintech financial inclusion mobile money digital finance. JEL Classification Codes: E4 E5 F36 G2 G3, fintech, financial inclusion, mobile money |
| Date: | 2022–12–04 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03904712&r=fdg |
| By: | Jung, Sunin (Korea Institute for Industrial Economics and Trade) |
| Abstract: | Among the Internet economy, e-commerce has recently emerged as the most dynamic sector. E-commerce GMV in Southeast Asia more than quadrupled from 5.5 billion USD in 2015 to 23 billion USD in 2018 with an annual growth rate of 62 percent over the period. Vietnam, along with Indonesia, is considered the fastest growing country in the e-commerce. The size of the Vietnamese e-commerce market sharply increased from 400 million in 2015 to 2.8 billion USD in 2018 and is expected to reach 15 billion USD in 2025. Besides e-commerce, the online media, online travel and online transportation and food delivery markets are promising, projected to expand significantly from 2.2 billion USD, 3.5 billion USD, and 500 million USD in 2018 to six billion USD, nine billion USD and two billion USD by 2025, respectively. The growth of the Internet economy including e-commerce is closely related to the demand for fintech. For example, digital payments are essential to the growth of the Internet economy. In Vietnam, only one in four e-commerce customers is shown to use digital payments because cash is traditionally favored and cash on delivery is widely accepted on major e-commerce platforms. However, this type of cash payment in e-commerce markets could cause friction between providers and consumers and incur additional costs. To this end, digital payment solutions are on the rise. In additional to digital payments, demand for various fintech solutions is expected to rise further, allowing for new types of transactions and investments as new business models based on the Internet and mobile have emerged. |
| Keywords: | Vietnam; fintech; financial services; e-commerce |
| JEL: | E42 G18 G23 G28 L84 |
| Date: | 2023–01–08 |
| URL: | http://d.repec.org/n?u=RePEc:ris:kieter:2019_023&r=fdg |
| By: | Mr. Maria Soledad Martinez Peria; Mr. Yannick Timmer; Mr. Nicola Pierri; Kosha Modi |
| Abstract: | This paper relies on administrative data to study determinants and implications of US banks’ Information Technology (IT) investments, which have increased six-fold over two decades. Large and small banks had similar IT expenses a decade ago. Since then, large banks sharply increased their spending, especially those which were more exposed to competition from fintech lenders. Other local-level and bank-level factors, such as county income and bank income sources, also contribute to explain the heterogeneity in IT investments. Analysis of the mortgage market reveals that fintechs’ lending behavior is more similar to that of non-bank financial intermediaries rather than IT-savvy banks, suggesting that factors other than technology are responsible for the differences between banks and other lenders. However, both IT-savvy banks and fintech lend to lower income borrowers, pointing towards benefits for financial inclusion from higher IT adoption. Banks’ IT investments are also shown to matter for the responsiveness of bank lending to monetary policy. |
| Keywords: | IT Adoption; Fintech Competition; Financial Inclusion; Monetary Policy; banks' IT investment; IT-savvy bank; tech spend; IT bank; Fintech; Mortgages; Loans; Income; Bank credit; Global |
| Date: | 2022–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:2022/244&r=fdg |
| By: | Alfred V Guender; Hamish McHugh-Smith |
| Abstract: | In a model comprising a bank and goods-producing firm, this paper advances the hypothesis that financial openness should be inversely related to the rate of inflation. Our empirical analysis reveals a strong and robust inverse link between financial openness and CPI inflation in over 100 countries over the 1997-2016 period, adding weight to the argument that inflation in financially open economies is indeed lower. This result obtains for OECD countries as well as non-OECD countries. Trade openness in contrast bears no systematic relationship to inflation. |
| Keywords: | Financial Openness, Trade Openness, Inflation, Bank Loans, Deposits, Nominal Price Rigidity |
| JEL: | E3 E5 F3 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2023-02&r=fdg |
| By: | Eduardo Corso (Central Bank of Argentina); Maximo Sangiacomo (Central Bank of Argentina) |
| Abstract: | dollarization hinders financial intermediation in domestic currency which is detrimental for economic growth and development. A broad branch of the financial dollarization literature is based on portfolio theory. Dollarization of savings portfolios is the result of optimal mean-variance portfolio selection. In this document, we use an optimal portfolio selection approach to analyse financial dollarization's hysteresis in Argentina. Based on the historical experience of our country, we model agents' expectations using second-order probability distributions, that allow us to incorporate positive bias in subjective distribution of dollar returns. This bias arises from the subjective perceptions of unsustainability of the current regime. Under the proposed analytical scheme, in contexts in which households and firms face difficulties in identifying informative signals about the sustainability of the current exchange-rate regime, policy measures aimed at promoting financial de-dollarization may produce unwanted behavior. For example, the usually stated mean-variance approach argument of rising real exchange rate volatility relative to domestic currency volatility (inflation) could be perceived as an increase in the subjective probability of regime change, leading to portfolio rebalancing towards the foreign currency, with opposite results to those expected. |
| Keywords: | dollarization, asset substitution, financial intermediation |
| JEL: | E52 F36 F41 G11 |
| Date: | 2023–01 |
| URL: | http://d.repec.org/n?u=RePEc:bcr:wpaper:2023106&r=fdg |
| By: | Ali, Amjad |
| Abstract: | This article has analyzed the role of financial globalization and corruption in determining financial dependency in Pakistan from 1980 to 2020. For checking the stationary of the data Augmented Dickey-Fuller and Zivot-Andrew structural break unit root tests. For examining the cointegration autoregressive distributed lag method has been applied. The results explain that the level of corruption has a positive and significant impact on financial dependency in Pakistan. Financial globalization has a negative and significant impact on financial dependency in Pakistan. The estimated outcomes explain that the unemployment rate and balance of payments have a positive and significant impact on financial dependency in Pakistan. The findings of this article suggest that for the reduction of financial dependency, the government of Pakistan should increase financial globalization and depresses corruption, unemployment, and balance of payments. |
| Keywords: | financial dependency, financial globalization, corruption, budget deficit |
| JEL: | D73 F36 F38 H61 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:116097&r=fdg |
| By: | Roger Vicquéry |
| Abstract: | This paper quantifies the relative dominance of global currencies and the competitive structure of the international monetary system since 1825. I find the post-1945 experience of dollar hegemony to have no historical precedent. No currency has ever maintained such a large, long-lasting lead over global currency rivals. Close competitors frequently challenged the previous hegemon, the pound sterling. I confirm the dollar temporarily overtook the sterling for the first time in the mid-1920s. Among previously overlooked episodes of monetary competition, I highlight the rise of the French franc in the 1850s and 1930s as well as of the German mark in the 1870s. In light of the recent debate on the costs and benefits of a multipolar international monetary system, I document a positive correlation between higher global currency competition and the prevalence of financial crises, which is however highly dependent on specific sub-periods. |
| Keywords: | International Monetary System, Long Run, Dollar Hegemony, Multipolarity |
| JEL: | F3 F4 N2 E5 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:banfra:882&r=fdg |