nep-fdg New Economics Papers
on Financial Development and Growth
Issue of 2023‒03‒06
24 papers chosen by
Georg Man

  1. The Choice of Technology and International Trade By Gong, Binglin; Zhou, Haiwen
  2. Exporting and Investment Under Credit Constraints By Kim Huynh; Robert Petrunia; Joel Rodrigue; Walter Steingress
  3. Inversión extranjera directa y calidad del gobierno: Evidencia para los países de América Latina y la OECD By Bibiana Lanzilotta; Eugenia Leira; Ronald Miranda
  4. FDI and the growing wage gap in Mexican municipalities By Ibarra-Olivo, J. Eduardo; Rodríguez-Pose, Andrés
  5. What draws investment to Special Economic Zones? Lessons from developing countries By Susanne A. Frick; Andres Rodriguez-Pose; ;
  6. Agricultural Growth in Cameroon: What Effects of Official Development Assistance Financing? By Ngoura Ndjidda; Ngo Bilong Adèe Amoa; Mohammadou Nourou
  7. Accumulation, inheritance and wealth distribution: first estimates of the untold half By Mauricio De Rosa
  8. Financial technology and human development in Africa: The moderating impact of energy poverty By Rilwan Sakariyahu; Fatima Oyebola Etudaiye-Muhtar; Rodiat Lawal; Olayinka Oyekola
  9. The Use of Fintech in Enhancing the Supervision of Internet-only Banks in Chinese Taipei By Wenwen Yeh
  10. Is There a Bitcoin–Macro Disconnect? By Gianluca Benigno; Carlo Rosa
  11. Bitcoin Mining Meets Wall Street: A Study of Publicly Traded Crypto Mining Companies By Hanna Halaburda; David Yermack
  12. The real-time macro content of corporate financial reports: a dynamic factor model approach By Abdalla, Ahmed; Carabias, Jose M.; Patatoukas, Panos N.
  13. "US uncertainty shocks, credit, production, and prices: The case of fourteen Latin American countries". By Carlos Giraldo; Iader Giraldo; Jose E. Gomez-Gonzalez; Jorge M. Uribe
  14. International Capital Flow Pressures and Global Factors By Linda S. Goldberg; Signe Krogstrup
  15. Financial Conditions for the US: Aggregate Supply or Aggregate Demand Shocks? By Alessia Paccagnini; Fabio Parla
  16. The Financial Conditions Index as an additional tool for policymakers in developing countries: the Mexican case By Capasso Salvatore; Oreste Napolitano; Ana Laura Vivero
  17. Financial Crisis in a Socialist Setting: Impact on Political Behavior, Social Trust, and Economic Values By Ran Abramitzky; Netanel Ben-Porath; Victor Lavy; Michal Palgi
  18. BANK DIVERSITY AND FINANCIAL CONTAGION By Emmanuel Caiazzo; Alberto Zazzaro
  19. Florida (Un)Chained By Charles W. Calomiris; Matthew S. Jaremski
  20. Forecasting the Net Charge-Off Rate of Large U.S. Bank Holding Companies using Macroeconomic Latent Factors By Hyeongwoo Kim; Jisoo Son
  21. Do Real Estate Asset and Other Listed Investment Assets Respond Similarly to Macroeconomic Fluctuations? An Inquiry From the Nigerian Investment Market By Ayodele Oluwafemi; Ololade Akinlabi
  22. Do pension funds reach for yield? Evidence from a new database By Maximilian Konradt
  23. Monetary Policy and Local Industry Structure By Lea Steininger; Alexander A. Popov
  24. The collapse of the gold standard in Africa: money and colonialism in the interwar period By Gardner, Leigh

  1. By: Gong, Binglin; Zhou, Haiwen
    Abstract: We study the impact of international trade on a firm’s technology choice in an infinite-horizon model. Banks engage in oligopolistic competition in providing capital for the manufacturing sector. Manufacturing firms also engage in oligopolistic competition and choose technologies with different levels of fixed and marginal costs. In the steady state, firms in a country with a larger market size or a more efficient financial sector choose more advanced technologies, and this country has a higher capital stock. The opening of international trade leads manufacturing firms to choose more advanced technologies and the steady-state capital stock increases.
    Keywords: International trade, technology choice, financial development, infinite-horizon model, two-stage oligopoly
    JEL: D43 F12 O14
    Date: 2023–02–01
  2. By: Kim Huynh; Robert Petrunia; Joel Rodrigue; Walter Steingress
    Abstract: We examine the relationship between firms’ performance and credit constraints affecting export market entry. The existing research assumes that variation in firms’ financial conditions identifies credit constraints. A critical assumption is that financial conditions do not affect real outcomes (performance, exporting, or investment). To relax this assumption, we focus on the direct effect of firms’ fundamentals and financial conditions on firms’ performance. This approach distinguishes between firms that choose not to export because it is unprofitable from firms that do not export because of binding credit constraints. Our empirical specification allows firms’ characteristics to enter both the selection into exporting and return from exporting regressions. The leverage response heterogeneity identifies the presence of credit constraints. Using administrative Canadian firm-level data, our findings show that new exporters (a) increase their productivity, (b) raise their leverage ratio and (c) increase investment. We estimate that 48 percent of Canadian manufacturers face binding credit constraints when deciding whether to enter export markets. Alleviating these constraints would increase aggregate productivity by 0.97–1.04 percentage points.
    Keywords: Econometric and statistical methods; Firm dynamics; International topics; Productivity
    JEL: F10 F14 F36 G20 G28 G32
    Date: 2023–02
  3. By: Bibiana Lanzilotta (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía); Eugenia Leira (Uruguay XXI); Ronald Miranda (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: This paper empirically studies the impact of economic, demographic, and institutional factors on foreign direct investment (FDI) in a sample of 46 developed and developing economies in the period 1996-2018. In particular, we examine to what extent quality of government impacts foreign investment inflows in 33 OECD countries and 13 Latin American countries. Applying panel data methods, we found that institutional quality positively affects FDI in both groups of countries. These findings are robust to different model specifications and estimation methods. From this study, it is possible to conclude that, it is essential the design of public policies which contribute to strengthening institutional quality, particularly in those economies with weaker institutions.
    Keywords: foreign direct investment, quality of government, Latin American countries, OECD countries, panel data
    JEL: C30 E02 F21
    Date: 2022–06
  4. By: Ibarra-Olivo, J. Eduardo; Rodríguez-Pose, Andrés
    Abstract: Inward foreign direct investment (FDI) has generally been linked to higher wages, but evidence remains sparse on the overall effects of FDI on average wages, the wage gap between skilled and unskilled labour, and inter-industry heterogeneity. We address these issues for Mexican municipalities and industries for a period of increasing FDI and sectoral change that saw growing wage inequality. By combining two non-experimental techniques we find that FDI in Mexico was associated with higher wages, mostly for skilled workers—but also for unskilled ones—and a widening gap between them. Effects vary both between and within industries depending on location, and they either wax or wane when the initial or incremental effects are considered.
    Keywords: foreign direct investment; industries; Mexico; municipalities; wage inequality
    JEL: R14 J01 N0
    Date: 2022–12–01
  5. By: Susanne A. Frick; Andres Rodriguez-Pose; ;
    Abstract: Special Economic Zones (SEZs) are a popular policy tool for the promotion of economic development. However, questions remain about their economic contribution and about what aspects of SEZ policies are most relevant to investors. This article sheds light on these issues by comparing SEZs across Africa, Asia and Latin America. We find that, while investment decisions by foreign companies are driven by market access, political stability and low labour costs, adequate SEZ policies facilitate the attraction of investment. A good industrial infrastructure together with a strategic location and service provision within the zones draw investment. Fiscal incentives, by contrast, have a limited influence on investment decisions.
    Keywords: Special Economic Zones, inward investment, industrial policy, developing countries, FDI location decision
    JEL: F21 O14 O24 L52
    Date: 2023–02
  6. By: Ngoura Ndjidda (UMa - Université de Maroua); Ngo Bilong Adèe Amoa (UMa - Université de Maroua); Mohammadou Nourou (UGa - Université de Garoua)
    Abstract: L'objectif de cet article est d'évaluer les effets de l'Aide Publique au Développement dans l'agriculture sur l'ensemble des secteurs de l'économie camerounaise. Plus spécifiquement, il s'agit d'évaluer les effets de ces financements sur la valeur la valeur ajoutée agricole, la valeur ajoutée industrielle, la consommation alimentaire, le bien-être de la population et la croissance économique. Pour y parvenir, nous avons mis à contribution le modèle d'Equilibre Général Calculable développé avec l'appui d'AGRODEP, du PEP et IFPRI. Nous arrivons, à l'issue des travaux, aux conclusions suivantes : toute augmentation des stocks d'Aide Publique au Développement, orientées vers le secteur agricole génère une croissance de la production agricole, une amélioration des recettes de l'Etat, et par ricochet contribue à la croissance économique. Pour y arriver, les actions fortes visant à améliorer le climat des affaires doivent être menées par les autorités pour attirer les capitaux extérieurs afin de financer ce secteur.
    Keywords: Official Development Assistance, Food security, Computable General Equilibrium, External financing, Agricultural growth, Mots Clés : Sécurité alimentaire, Équilibre Général Calculable, Financements Extérieurs, Croissance agricole, Aide Publique au Développement
    Date: 2022–10
  7. By: Mauricio De Rosa (Universidad de la República (Uruguay). Facultad de Ciencias Económicas y de Administración. Instituto de Economía)
    Abstract: While wealth accumulation and its distribution are arguably two of the key drivers of overall economic inequality and of major importance in their own right, very little is known about them in the developing world. I contribute to filling this gap by providing micro-macro consistent series of aggregate wealth and its distribution in Uruguay. The country's balance sheet, which is not estimated by official institutions, is constructed for the first time by combining a wide array of data sources, reaching a wealth to income ratio of 500%. Private wealth distribution is then estimated based on the capitalization method, taking stock of combined survey-tax-national accounts micro-data, resulting in a top 1% of 38-40%. Estimates are systematically compared with results based on the estate multiplier method, real estate wealth tax, household wealth survey and Forbes billionaires list. Moreover, the inheritance flow is estimated, reaching 9-10% throughout the period, consistent with a 60% inheritance stock. These estimates represent the first coherent and comparable depiction of wealth and its distribution for a Latin American country, hence providing insights to a completely unknown reality thus-far.
    Keywords: wealth distribution, wealth to income ratios, capitalization method, tax records, national accounts, developing countries, Uruguay
    JEL: D31 E01 E22
    Date: 2022–05
  8. By: Rilwan Sakariyahu (Business School, Edinburgh Napier University); Fatima Oyebola Etudaiye-Muhtar (Ilorin Business School, University of Ilorin); Rodiat Lawal (School of Finance and Management, SOAS University of London); Olayinka Oyekola (Department of Economics, University of Exeter)
    Abstract: Several studies in the academic literature have identified the critical role of financial technology (fintech) in improving socio-economic conditions of nations, measured by human development index (HDI). However, despite the efforts to increase HDI using fintech, the ranking of African countries on the index table remains low. Given that access to electricity is imperative for fintech, and fundamental to human development, we provide novel evidence by investigating the degree to which the prevailing energy poverty in Africa affects the success of fintech on human development on the continent. Employing a number of econometric techniques which include linear (OLS, Prais-Winsten), instrumental-variable (GMM) and non-linear (M-M Quantile) regression models, our empirical framework is robust to heteroscedasticity, endogeneity, and cross-sectional dependence among countries. Our results show that fintech has a significant positive impact on human development and the impact remains consistent irrespective of the estimation methods employed. However, when we split our sample based on regions and income classification proposed by the World Bank, our results show that the impact of fintech, when interacted with access to electricity, on human development is more pronounced in the upper-middle, high-income, Eastern, Central and Southern countries. The Western countries have not significantly benefitted from fintech adoption, perhaps because those countries fall in the low-income categories and have a high prevalence of energy challenge. In light of the current state of human development in Africa, our study advocates for more investment in energy infrastructure for the rapid realization of the gains of fintech.
    Keywords: fintech, human development, energy poverty, access to electricity, sub-Saharan Africa
    JEL: C22 O43 Q4 Q43 Q48 Q55
    Date: 2023–02–15
  9. By: Wenwen Yeh (Central Deposit Insurance Corporation)
    Abstract: The Central Deposit Insurance Corporation (CDIC) has introduced a reporting method for internet-only banks platform to conduct real-time monitoring and generate visualized analytical reports. The tool is based on an application programming interface (API). In alignment with the international Suptech development and acting in accordance with the policy of the Chinese Taipei Financial Supervisory Commission, CDIC established the Internet-only Banking Supervisory System (IBSS). This is an API-based platform, to which internet-only banks must file certain reports periodically and abnormal event notifications in real-time. This new monitoring and supervision fashion is in line with the IADI Core Principle 13 on 'Early Detection and Timely Intervention', which calls for a framework in which deposit insurers and financial authorities can detect potential threats in an early stage and intervene timely. The IBSS triggers an instant message alert to the CDIC and other financial safety net members upon an abnormal event to raise vigilance. In addition, the data collected through IBSS are made available to the relevant financial safety net members for use in supervision and risk monitoring.
    Keywords: deposit insurance, bank resolution
    JEL: G21 G33
    Date: 2023–01
  10. By: Gianluca Benigno; Carlo Rosa
    Abstract: Cryptocurrencies’ market capitalization has grown rapidly in recent years. This blog post analyzes the role of macro factors as possible drivers of cryptocurrency prices. We take a high-frequency perspective, and we focus on Bitcoin since its market capitalization dwarfs that of all other cryptocurrencies combined. The key finding is that, unlike other asset classes, Bitcoin has not responded significantly to U.S. macro and monetary policy news. This disconnect is puzzling, as unexpected changes in discount rates should, in principle, affect the price of Bitcoin.
    Keywords: cryptocurrency; Bitcoin; macro news; bubbles
    JEL: E2 E52
    Date: 2023–02–08
  11. By: Hanna Halaburda; David Yermack
    Abstract: This paper studies the operations and financial valuations of 13 cryptocurrency mining companies that are listed on the NASDAQ stock exchange and have facilities in North America. We find that miners using Texas wind power are offline more than other miners, in a more erratic pattern, while receiving significant revenue augmentations from “curtailment” payments by electric utilities. Despite having relatively low activity levels, these Texas miners are more profitable than those using more stable sources of energy such as hyrdo power or solar power, as reflected in significantly higher enterprise values. We find a negative and significant beta between crypto mining stocks and an index of electric utilities, suggesting that ownership of a crypto mining company might provide a useful channel for risk management in the electric power industry.
    JEL: G23 L23 L94
    Date: 2023–02
  12. By: Abdalla, Ahmed; Carabias, Jose M.; Patatoukas, Panos N.
    Abstract: We use a standard dynamic factor model to extract new factors based on the real-time flow of accounting data from the corporate financial reports. The extracted accounting factors exploit across-sector comovements in corporate value creation drivers and can be used together with other closely watched economic indicators. We show that our weekly updated accounting factors are incrementally relevant for nowcasting and forecasting major components of economic output in the BEA’s National Income and Product Accounts. Overall, our paper pioneers a new approach to incorporating the continuous flow of accounting data within the context of dynamic factor models.
    Keywords: Corporate Financial Reports; Nowcasting; Forecasting; Macro Accounting
    JEL: F3 G3 M40
    Date: 2021–03–01
  13. By: Carlos Giraldo (Latin American Reserve Fund.); Iader Giraldo (Latin American Reserve Fund.); Jose E. Gomez-Gonzalez (Lehman College, City University of New York.); Jorge M. Uribe (Universitat Oberta de Catalunya.)
    Abstract: The extant literature has examined the impact of United States’ uncertainty shocks on developed and large emerging market economies. However, this research has not accounted for global cycles in production, credit, and prices, which can influence the estimates of the effects of US uncertainty on the rest of the world. The effects of uncertainty in highly indebted emerging open economies, which depend heavily on US financial and real conditions, have not been studied. We analyze the effects of uncertainty shocks on 14 Latin American countries (LACs) of various sizes and various levels of dependence on US financial and real flows. Latin America is a highly indebted and heterogeneous region that is sensitive to US economic and financial conditions, particularly uncertainty, in its various dimensions: real, financial, and policy related (including monetary policy). Our results show that the effects of real and financial uncertainty are more significant and long lasting than the effects of economic and monetary policy uncertainty, as measured by the use of uncertainty-related key words. All forms of uncertainty have a larger and more persistent impact on the gross domestic product of countries than the impact on credit and prices. In general, uncertainty in the US depresses economic activity in Latin America, although there is significant heterogeneity in the effects, which warrants detailed analysis of individual countries when considering policy implementation and portfolio diversification.
    Keywords: Macroeconomic uncertainty, Financial uncertainty, Policy uncertainty, Global business cycles, Latin America. JEL classification: D80, E44, F21, F44, G15, O54.
    Date: 2023–02
  14. By: Linda S. Goldberg; Signe Krogstrup
    Abstract: The risk sensitivity of international capital flow pressures is explored using a new Exchange Market Pressure index that combines pressures observed in exchange rate adjustments with model-based estimates of incipient pressures that are masked by foreign exchange interventions and policy rate adjustments. The sensitivity of capital flow pressures to risk sentiment, including for so-called safe-haven currencies, evolves over time, varies significantly across countries, and differs between normal times and extreme stress events. Across countries, risk sensitivities and safe-haven status are associated with self-fulfilling exchange rate expectations and carry trade funding currencies. In contrast, association with more traditional macroeconomic country characteristics is weak.
    Keywords: exchange market pressure; risk aversion; safe haven; capital flows; exchange rates; foreign exchange interventions; global financial cycle
    JEL: F32 G11 G20
    Date: 2023–02–01
  15. By: Alessia Paccagnini; Fabio Parla
    Abstract: It depends. We reply to this question by providing novel empirical evidence about the US economy. We identify the impact of financial high-frequency shocks on macroeconomic variables by estimating mixed- and common frequency VARs. The results from the mixed-frequency VAR show that economic output and inflation move in opposite directions in response to detrimental financial conditions, mimicking negative aggregate supply shocks. Oppositely, the results from the common-frequency VAR show that worsening financial conditions lead to a drop in output and inflation (and in the monetary policy rate), resembling negative aggregate demand shocks.
    Keywords: Financial Conditions, High-Frequency, Shock Identification, Mixed-Frequency VAR
    JEL: C32 C54 E44
    Date: 2023–02
  16. By: Capasso Salvatore (Università di Napoli Parthenope, ISMed-CNR, and CSEF.); Oreste Napolitano (Università di Napoli Parthenope, ISMed-CNR); Ana Laura Vivero (Universidad Nacional Autónoma de Mexico UNAM)
    Abstract: The nature of the financial crisis in 2008 posed new challenges for macroeconomic theory and policy-makers. In this context, a financial conditions index (FCI) could be a useful tool to identify the state of financial conditions in a country. We construct three FCIs for Mexico to analyse the role of financial asset prices in formulating monetary policy under an inflation-targeting regime. Using monthly data from 1995 to 2017, we estimate FCIs with three different methodologies and build the index by taking into account the mechanism of transmission of monetary policy and incorporating the most relevant financial variables. Our results show that, likewise for developing countries such as Mexico, an FCI could be a useful tool for managing monetary policy in reducing macroeconomic fluctuations.
    Keywords: Financial conditions index, VAR model, ARDL model, TVP-VAR model.
    JEL: C32 G01 E44 O54
    Date: 2023–01–17
  17. By: Ran Abramitzky; Netanel Ben-Porath; Victor Lavy; Michal Palgi
    Abstract: Research on the political and social impacts of financial crises has focused chiefly on free market economies, hindering our understanding of their effects in other settings. We exploit an episode of a financial crisis that hit the Israeli kibbutzim to study its impact in a socialist context. Contrary to findings in capitalistic economies, the crisis led to increased support of liberalized labor markets and reduced support for leftist political parties. These effects persisted in the long run, especially among the young. The crisis also reduced trust in leadership, but trust was restored shortly after agreements to settle the debt were signed, relieving the severity of the crisis. Our findings suggest that economic shocks may have different effects in a free market and socialist systems, in both cases leading individuals to question their current system.
    JEL: J0 P00
    Date: 2023–02
  18. By: Emmanuel Caiazzo (University of Naples Federico II); Alberto Zazzaro (Department of Economics and Statistics, University of Naples Federico II, CSEF, and MoFiR)
    Abstract: This paper analyzes financial contagion in a banking system where banks are linked by interbank claims and common assets. We find that asset commonality makes banking systems more vulnerable to idiosyncratic shocks and helps to determine which interbank network structures are resistant to contagion. When the degree of commonality is homogeneous across banks, the most resilient structure is the complete interbank network in which each bank borrows evenly from all the others. However, when the bank most exposed to the defaulting bank is not the one whose portfolio is most similar to it, incomplete interbank networks are more resilient than complete. We also show that the degree and variability of asset commonality between banks and the way this intertwines with the cross-holdings of interbank deposits have important implications for macroprudential regulation.
    Keywords: Banking crisis; financial contagion; interbank network; asset commonality
    JEL: G01 G21 G28
    Date: 2023–02
  19. By: Charles W. Calomiris; Matthew S. Jaremski
    Abstract: To understand a price boom, it is helpful to take account of: (1) observable indicators of changes in ex ante risk tolerance, (2) what information exists and when, and (3) the incentives lenders face. This paper takes such an approach to the Florida land boom of the mid-1920s, the U.S.’ first housing boom in which buyers from around the nation participated. Estimates suggest that an astounding 20 million lots were offered for sale in Florida at that time. Our detailed narrative and empirical evidence suggest that the facts do not require the assumption of irrational behavior, but rather can be explained with all actors behaving with “bounded rationality.” We find that most Florida banks that failed were associated with the Manley-Anthony chain and did not exhibit increases in observable indicators of risk during the boom. Instead, their increases in risk mainly reflected hidden choices either to lend to bank insiders on a preferential basis or to fund other banks that were engaged in such risky and often fraudulent activities. Given bank regulators seem complicit in the risk-taking, even informed investors would have been left in the dark as to the amount of risk that was growing Florida.
    JEL: E30 G21 N22
    Date: 2023–02
  20. By: Hyeongwoo Kim; Jisoo Son
    Abstract: Charge-offs signal important information about the riskiness of loan portfolios in the banking system, which can generate systemic risk towards deep recessions. We compiled the net charge-off rate (COR) data of the top 10 bank holding companies (BHCs) in the U.S. utilizing consolidated financial statements. We propose factor-augmented forecasting models for CORs by estimating latent common factors, including targeted factors, via an array of data dimensionality reduction methods for a large panel of macroeconomic predictors. Our models outperform the benchmark models especially well for business loan CORs, while enhancing predictive contents for consumer loans are harder at short horizons. Real activity factors enhance the out-of-sample predictability for business loan CORs even when financial sector factors are excluded.
    Keywords: Net Charge-Off Rate; Bank Holding Companies; Principal Component Analysis; Partial Least Squares; Out-of-Sample Forecast
    JEL: C38 C53 C55 G01 G17
    Date: 2023–02
  21. By: Ayodele Oluwafemi; Ololade Akinlabi
    Abstract: Purpose: This study analysed the response of indirect real estate asset and other listed investment assets to macroeconomic fluctuations in the Nigerian property market. This is with a view to determining the long-run convergence of indirect real estate assets and other listed investment assets when combined in a portfolio in the Nigerian emerging market.Design/Methodology/Approach: The secondary data collected comprised quarterly returns on the indirect real estate asset and the other listed investment assets; Nigerian Stock Exchange (NSE) Banking, NSE Oil and Gas, NSE Industrial, NSE Insurance and NSE Consumer, for the period of January 2009 to December 2020. Others include quarterly data on five macroeconomic variables which are inflation rate, unemployment rate, exchange rate, GDP and interest rate over the study period. The data were obtained through the daily price list of the Nigeria Stock Exchange (NSE) via NSE website, the Central Bank of Nigeria Statistical Bulletin and the National Bureau of Statistics. The data were analysed using the holding period return, percentages and the impulse response function obtained from the Variance Error Correction Model (VEC).Findings: The result showed that the response of indirect real estate to each macroeconomic fluctuations vary from that of other listed investment assets along the short run. However, the indirect real estate and other listed investment assets readjusted and exhibited similar responses along the long run which connotes that indirect real estate asset and other listed investment assets have long run equilibrium, in order words, they comove at the long run.Practical Implications: The paper implied that indirect real estate asset and other listed investment assets have similar responses to macroeconomic fluctuations along the long run which implies that the asset classes have long run convergence.Originality/value: The paper represents one of the few attempts to examine the long-run response to macroeconomic variations of real estate investment asset and other listed investment asset from emerging market perspective.
    Keywords: Macroeconomic factors, macroeconomic fluctuations, real estate asset, investment asset, emerging market
    JEL: R3
    Date: 2022–01–01
  22. By: Maximilian Konradt (IHEID, Graduate Institute of International and Development Studies, Geneva)
    Abstract: This paper investigates the financial risk-taking behavior of pension funds since 2000. I assemble a new database containing portfolio holdings of more than 100 pension funds from 14 advanced economies. The study reveals three key findings. First, I show that pension fund portfolios have become riskier over that period, with an average increase in risky asset weights of 4 percentage points since 2008. European pension funds tend to invest more in public equities while North American and Asian funds focus on alternative assets. Second, I find evidence that declining domestic risk-free rates play a significant role in driving the trend, with pension funds increasing their risky asset exposure in response to falling short-term interest rates. Third, I demonstrate that less underfunded pension funds with fewer risky assets tend to reach for yield more aggressively, which is exacerbated during periods of low risk-free rates. This is most pronounced for European pension funds, particularly after the global financial crisis.
    Keywords: Low interest rates; Pension funds; Risk-taking; Reach for yield
    JEL: E43 F21 G11 G23
    Date: 2023–02–01
  23. By: Lea Steininger (Department of Economics, Vienna University of Economics and Business; Vienna Institute for International Economic Studies); Alexander A. Popov (Monetary Policy Research Division, European Central Bank)
    Abstract: We study how monetary policy affects local market competition in a union of countries experiencing different economic conditions: the euro area. We find that when monetary conditions tighten (loosen), from the point of view of an individual economy, market concentration increases (declines). This effect is more pronounced when interest rates have been low-for-long, and it is stronger in sectors that are relatively more sensitive to changes in financing conditions. The underlying mechanism is a decline (increase) in short-term debt and investment by smaller and medium-size firms, relative to large firms, following monetary policy tightening (easing).
    Keywords: Eurozone, Monetary Union, Monetary Policy, Low Interest Rates, Competition
    JEL: E2 G1 G12
    Date: 2023–02
  24. By: Gardner, Leigh
    Abstract: Research on Africa’s monetary history has tended to focus on the imposition of colonial currencies while neglecting the monetary upheavals which faced the colonial powers after the collapse of the gold standard during World War I. Gardner profiles three crises—in The Gambia, Kenya, and Liberia—resulting from shifting exchange rates between European currencies during the 1920s and 1930s. These three cases illustrate the degree to which colonial policies struggled to keep up with the economic turmoil affecting metropolitan states and bring Africa into the story of global monetary instability during the interwar period, which is often told only from a European perspective.
    Keywords: gold standard; colonialism; exchange rates; The Gambia; Liberia; Kenya; CUP deal
    JEL: N17 F54
    Date: 2022–12–20

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