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on Financial Development and Growth |
| By: | Ritam Chaurey; Ryan Kim; Pravin Krishna |
| Abstract: | This paper examines how liquidity shocks caused by currency shortages impact exports. We explore this in the context of India’s 2016 currency demonetization, a sudden and unexpected policy announcement by the government that large-denomination currency notes—comprising 86% of the country’s currency in circulation—would cease to be legal tender within hours. Our analysis uses novel data, including high-frequency customs transaction records matched with exporting firms and their balance sheets, as well as with inter-district domestic trade. We develop direct measures of exporting firms’ exposure to cash shortages and indirect measures that act through domestic supply chain networks. While the cash shortages do not directly affect exporting firms, we find a significant and immediate decline in real exports for firms whose domestic customers experience liquidity shocks. These findings underscore the critical role of domestic supply chains in transmitting liquidity shocks to exports. |
| JEL: | E50 F1 F14 O16 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33142 |
| By: | Muya, Jonathan; Malata, Alain |
| Abstract: | The Democratic Republic of Congo (DRC) has faced persistent current account deficits despite a period of economic growth fueled by Foreign Direct Investment (FDI). This paper uses an Autoregressive Distributed Lag (ARDL) model and the Balance of Payments (BOP) framework to explore the dynamics of the current account. It identifies economic growth and FDI as key factors influencing the current account balance, both in the short and long term. A key finding is that FDI inflows often coincide with a worsening current account. This is attributed to the relationship between capital inflows, increased private income, and higher imports, driven by limited local competitiveness. This dependence on imports highlights the structural weaknesses in the DRC’s economy. The study’s contribution is in identifying the dual role of FDI: while it boosts economic growth, it also increases external vulnerabilities by promoting import reliance. This insight is crucial for understanding the DRC’s current account issues and shaping policy to address them. To ensure sustainable development, the DRC must address these structural challenges through comprehensive reforms in industry, infrastructure, and education. These efforts would enhance local productivity, reduce import reliance, and lessen economic vulnerabilities. Moreover, promoting value-added sectors and export diversification is essential for long-term sustainability. Improving the business environment and fostering innovation could further support economic resilience. By addressing these issues, the DRC can better harness FDI for growth while reducing the current account deficit. In conclusion, this paper highlights the complex relationship between FDI and the current account in the DRC. It calls for urgent structural reforms to improve economic resilience and move towards more sustainable growth. |
| Keywords: | Current account sustainability, Intertemporal approach, FDI, Inertial Vulnerabilities |
| JEL: | F21 F31 F32 F41 F43 O14 O55 |
| Date: | 2024–11–17 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122709 |
| By: | Christopher M. Meissner; Kensuke Molnar-Tanaka |
| Abstract: | Over the last 200 years, economies have accumulated significant experience in managing capital flows in the face of globalization. This study examines management of capital flows since the 1800s with an eye towards providing historical lessons for Southeast Asia today. We start with the global sterling/gold standard regime of the late 19th century globalization and then discuss the tumultuous inter-war period. We then examine policies in Southeast Asian countries since the 1950s. In the 1980s and 1990s, many economies faced increasing financial instability related to the resumption of global capital flows, most noticeably in Southeast Asia during the Asian Financial Crisis. The paper examines the historical importance of exchange rate policies for capital flow stability. Capital flow management in the 21st century faces various challenges such as enhanced state-intervention and digital currencies. |
| JEL: | F21 F33 F36 N20 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33145 |
| By: | Kovachev, Goran |
| Abstract: | Unlike classic private commercial banks whose beginnings are in the late 15th century, the public development banks are a relatively new phenomenon. Namely, after the WW2 when large investments in infrastructure were needed, and especially in the 1960s, when the neo-Keynesianism took the scene, advocating direct state intervention in priority economic sectors, the public development banks as counter-cyclical financial institutions were largely introduced. The Development Bank of North Macedonia is a first and only state-owned development bank in the country, established in 1998 by a special Law. The Bank's role is to promote the development of Macedonian economy in accordance to North Macedonia's strategic economic priorities and objectives. |
| Keywords: | national development banks; Development Bank of North Macedonia; economic development; green finance |
| JEL: | G21 |
| Date: | 2024–10–31 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122582 |
| By: | YUVRAJ SUNECHER (UNIVERSITY OF TECHNOLOGY MAURITIUS); Mevin Luchoo (University of Technology Mauritius) |
| Abstract: | This study investigates the degree of financial awareness and literacy in Mauritius. A survey was conducted to find out about the population's understanding of financial products, investment alternatives, borrowing, saving, investing, and financial abilities. The population's degree of savings knowledge is high, whereas their understanding of general finance, investments, and insurance is low to average, according to the study's conclusion. This study also looks into the population's financial literacy and awareness as well as the steps that the appropriate authorities should take to make sure that people are taught not only how to budget and save money but also how to invest in assets, protect their finances, and?most importantly?how to manage their money sensibly by forming good financial habits. |
| Keywords: | Financial Literacy, Population, Awareness, Mauritius |
| URL: | https://d.repec.org/n?u=RePEc:sek:iefpro:14716502 |
| By: | Asuamah Yeboah, Samuel |
| Abstract: | This review systematically examines the expenditure patterns of low-income households, focusing on how limited financial resources influence their spending decisions. It reveals that a significant portion of income is devoted to necessities such as food, shelter, and utilities, leaving little room for discretionary spending. The financial burden of debt repayment, particularly from high-interest loans, is a major challenge, as are healthcare and emergency costs, often exacerbated by a lack of insurance and savings. The review also highlights the prioritisation of affordable education and skills development, the low savings rates driven by immediate needs, and the reliance on informal support networks. Additionally, it underscores the common practice of substitution and bargain hunting as strategies to manage scarce resources. The findings emphasise the need for targeted policies to enhance financial stability and well-being among low-income populations. |
| Keywords: | Basic Needs, Discretionary Spending, Debt Repayment, Healthcare Costs, Education and Skills Development, Savings Behavior, Substitution Strategies, Financial Stability |
| JEL: | D12 D14 I32 J24 R21 |
| Date: | 2024–08–14 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122642 |
| By: | Aaberge, Rolf (Statistics Norway); Modalsli, Jorgen Heibo (Oslo Metropolitan University); Francesconi, Marco (University of Essex); Vestad, Ola L. (Statistics Norway) |
| Abstract: | This paper presents estimates of income concentration and inequality for Norway using a new comprehensive measure of income, which identifies business income as it is earned by companies rather than when it is paid out as dividends to owners. We assemble several sources of high quality register data that allow us to account for multiple layers of business ownership across all companies between 2001 and 2018. Compared to official statistics, the new measure implies that the share of income attributable to the top 1% of the distribution more than doubles and the Gini coefficient estimates increase by about 40%. Our new measure identifies substantial tax regressivity for individuals in the top percentile, a feature that cannot be detected by standard income measures. For instance, while the share of gross income paid in taxes by individuals at the 99th percentile is about 36% in 2016, the corresponding share paid by individuals in the top 1% is 19%. |
| Keywords: | income distribution, top income shares, Gini coefficient, dividends, retained earnings, tax burden |
| JEL: | D31 D63 E01 H24 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:iza:izadps:dp17458 |