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on Financial Development and Growth |
| By: | Chowdhury, Emon Kalyan |
| Abstract: | This study investigates the impact of stock market development on economic growth in South Asia, focusing on India, Bangladesh, Pakistan, and Sri Lanka. Using panel data analysis and considering key macroeconomic variables, the study finds a strong positive correlation between stock market capitalization and turnover, and GDP growth. However, significant heterogeneity exists across countries. India demonstrates substantial growth driven by mature markets, while others face challenges related to liquidity and regulatory oversight. The study emphasizes the crucial role of strong governance, financial literacy, regional cooperation, and policies that encourage long-term investment in unlocking the full potential of stock markets to drive sustainable economic progress in South Asia. |
| Keywords: | Stock market development; economic growth; South Asia; financial markets; regional integration |
| JEL: | E5 F3 G24 |
| Date: | 2024–11–14 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123002 |
| By: | Romero Stéfani Mauro Ignacio; Rojas Mara Leticia; Ibáñez Martín María María |
| Abstract: | The economic performance of countries is affected by factors such as financial and trade openness, but their impact on economic growth remains debated. This paper uses parametric panel estimation to analyse how different aspects of commercial and financial openness influence long-term economic growth across 167 economies from 1960 to 2019. The findings reveal that the relationship between financial openness and economic growth differs based on a country’s development level and the specific aspect of financial openness. For high- and low-income countries, a higher ratio of total foreign assets and liabilities to GDP negatively affects growth. Conversely, in middle-income economies, a higher ratio of portfolio equity assets and liabilities to GDP is positively linked to growth. For this group, reducing capital controls is associated with lower growth, while there is some evidence of a positive relationship between a reduction in controls and growth for the high-income group. Trade openness suggests a positive relationship with growth for the whole sample and for high-income countries but is more ambiguous for low- and middle-income countries. Moreover, a negative correlation between real appreciation and growth seems to be statistically robust, especially when financial openness indicators are included for low- and middle-income countries. |
| JEL: | O4 F3 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4758 |
| By: | Amadi, Matthew Chima; ODOZI, JOHN CHIWUZULUM |
| Abstract: | The increasing flow of remittances and the growth of Nigeria's diaspora population are attracting policy discussions and debates. Many scholars view the mobilization of remittances as a more resilient channel for development financing compared to other traditional sources. The study explores the role of remittances in economic growth and the financial development pathway empirically. We used autoregressive distributed lag (ARDL) and Granger causality techniques and time series data covering the period from 1996 to 2020. From the table, we found a statistically significant negative long-run relationship between remittances and economic growth. However, in the short run, a significant positive relationship was found to exist between remittances and financial development reflecting a complementary relationship. Our findings also showed that foreign direct investment (FDI) and gross domestic formation(GCF) were statistically significant in their relationship with financial development in the long run. From the pairwise Granger test, a unidirectional causality from remittance inflows (Rem) to financial development was established while bidirectional causality between foreign direct investment (FDI) and gross capital formation (GCF). The study concludes that a certain degree of financial development might stifle long-term economic progress, and the combined effect of financial development and remittances should be of concern to policymakers. Given the study's finding of a negative contribution of remittances to economic growth in the long run, a significant policy consequence is that efforts to encourage remittances and those to improve the financial system should be undertaken concurrently. |
| Date: | 2024–11–30 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:bygma |
| By: | Guglielmo Maria Caporale; Luis Alberiko Gil-Alana; Karen Roxana Quinatoa Narváez |
| Abstract: | This paper analyses remittances in fifteeen Latin American countries (Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Panama, Dominican Republic, Uruguay and Venezuela) by applying fractional integration methods to World Bank annual data. The start year varies from 1970 in Colombia and Venezuela to 2003 in Uruguay, while the end year is 2022 in all cases except Venezuela, for which it is 2016. The chosen approach provides evidence on trends and persistence in the series under investigation. The results indicate that the effects of shocks to remittances are transitory only in Guatemala and Honduras. This might reflect the rather stable employment and wages of migrant workers from these two countries residing in the US, cultural factors, and the relatively small values and/or low volatility of remittances to these two countries. |
| Keywords: | remittances, time trends, persistence, fractional integration |
| JEL: | C22 G20 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11505 |
| By: | Aghion, Philippe (INSEAD); Bergeaud, Antonin (HEC Paris); De Ridder, Maarten (University of Cambridge); Van Reenen, John (London School of Economics) |
| Abstract: | Green innovation offers a solution to climate change without compromising living standards. Yet the share of climate-enhancing innovations in total patents, after booming for two decades, has seized to grow since the Global Financial Crisis. We develop a quantitative framework in which firms direct innovation towards green or polluting technologies, and become better at innovating in technologies that they have previously succeeded in. This causes mature, incumbent firms to predominantly innovate in polluting technologies. When green technologies become more attractive, e.g. due to a carbon tax, young firms are responsible for a large share of the transition to green innovation. As young firms are financially constrained, a credit shock harms their innovation, bringing the green transition to a halt. We validate the theory with two empirical exercises. First, we use micro data to provide causal evidence that tight credit disproportionately affects green innovation, through its effect on young firms. Second, we show that contractionary monetary policy shocks have a significantly larger effect on green patenting than non-green patenting, in line with the model. Quantifying the model, we find that tight credit can explain around 60% of the recent slowdown in the rise of green patenting. This translates to a cumulative increase in emissions by half a year of the initial (high pollution) steady state. |
| Keywords: | Climate Change; Productivity; Endogenous Growth; Innovation; Creative Destruction |
| JEL: | A10 |
| Date: | 2024–03–25 |
| URL: | https://d.repec.org/n?u=RePEc:ebg:heccah:1512 |
| By: | David L. Kelly; Christopher Paik |
| Abstract: | We assess the feasibility, optimality, and policy implications of Environmental, Social, and Corporate Governance (ESG)-linked or “green” lending in a credit market where banks incorporate such non-financial data in credit allocation decisions. We identify an asymmetric information problem: borrowers signal low financial risk to banks who are uncertain about borrower risk levels by engaging in green investments. We derive conditions under which banks segment the market into green and brown loan products and evaluate market efficiency. We find borrowers prioritize signaling over the environmental impact of green investments, and the market sustains only limited green lending, since if all borrowers make green investments, no signaling value exists. The optimal carbon tax policy replaces the signaling value of green investments with the marginal damage and outperforms a brown reserve requirement aimed at discouraging brown lending. However, both policies also can sustain only a limited amount of green investments. We conclude that while green lending by banks can enhance welfare relative to an unregulated market, the resulting market segmentation can make the social optimum infeasible, even with carbon tax regulation. |
| Keywords: | competitive screening, ESG, environmental risk, climate risk, sustainable banking, sustainable finance, stranded assets |
| JEL: | D80 D81 Q54 Q56 Q58 G21 E58 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11522 |
| By: | N. Nergiz Dincer (TED University); Pelin Pektekin (TED University); Ayça Tekin-Koru (TED University) |
| Abstract: | This paper presents the panorama of zombie firms in the Turkish economy, which are highly inefficient, highly indebted firms that have low or sometimes negative productivity and provides an analysis of the impact of these firms on economic activity for the period 2012-2015. Our results suggest that the number of zombie firms in Türkiye has increased. The share of these firms in sales and employment has also increased, but at a lower rate. These firms are mainly found in lowtechnology manufacturing and transportation and distribution services. The paper also shows that healthy firms increase total factor productivity, employment growth, and the investment-to-capital ratio in the economy in a robust manner. The sales of zombie firms have no distorting effect on the economic activity of healthy firms. However, capital sunk into zombie firms has a differential impact on the performance of healthy firms. When the share of zombie capital in a sector increases, the TFP growth of manufacturing firms decreases, while the employment growth of medium-sized service firms increases. |
| Date: | 2024–08–20 |
| URL: | https://d.repec.org/n?u=RePEc:erg:wpaper:1720 |
| By: | ., Kaustubh; Ghosh, Taniya |
| Abstract: | The paper investigates the causes of rising inequality among Indian states in terms of per capita State Domestic Product (GDP) in recent decades by examining the convergence/divergence between 20 major Indian states from 2000 to 2019. The paper adds to the existing literature by including the newly created states of Jharkhand, Chhattisgarh, and Uttarakhand in the sample. The paper, like previous research, finds 'conditional' convergence between states per capita GDP; however, the literature cannot determine whether this is due solely to different steady states caused by state-specific characteristics or to differences in productivity growth rates. According to our findings, differences in productivity growth rates, as well as different steady states, are the drivers of states' increasing per capita GDP inequality. Factors such as population growth rate, bank credit/GDP ratio, and shares of agriculture and industry in the GDP explain the differences in steady states between states, which drive the disparity in per capita GDP between states. Therefore, to reduce inequality, the states with low per capita GDP may benefit from rebalancing these variables. Furthermore, we must also investigate the causes of variations in productivity growth rates to address growing regional inequality. |
| Keywords: | Solow Model, Conditional Convergence, Beta-convergence, Stochastic convergence, Unit Root, Fixed Effect |
| JEL: | O10 O47 |
| Date: | 2024–01–01 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122775 |
| By: | Roberto Iacono; Krishna Chaitanya Vadlamannati |
| Abstract: | We investigate the impact of foreign aid on inter-governmental transfers in India. While anecdotal evidence suggests that the central government substitutes fiscal transfers with earmarked foreign aid for state governments (fungibility), empirical evidence is scant due to the complex procedure of accruing foreign aid by the states. By Constitutional design, all foreign aid projects procured by states accrue to the central government which are then distributed to states as Additional Central Assistance (ACA) on Externally Aided Projects (EAPs). Analysing panel data covering 29 states from 1979 to 2017, we find that EAPs per capita are positively associated with the central government fiscal transfers to states under discretionary head (resource loading), but not with formulaic transfers. Importantly, the positive effect of EAPs on discretionary transfers is contingent on political alignment between the central and state governments, a finding consistent with previous works that demonstrate how recipient governments target aid at the subnational level based on local political factors. These findings have significant policy implications for the centre, state governments, and external aid donors. |
| Keywords: | fiscal transfers, externally aided projects, India |
| JEL: | F35 H70 H74 H77 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11498 |
| By: | Roberto Tamborini |
| Abstract: | The public debt overhang spread across advanced countries, and the reform of the Stability and Growth Pact in the Euro Zone, have revived the polarization between those who think that debt is always good and those who think that debt is always bad. This paper presents a normative model of endogenous growth with debt-financed public capital. It is shown that no meaningful assessment of debt and its effect on growth and sustainability at any point in time is possible without reference to the whole debt trajectory and the specific state of the economy along the trajectory. An orderly and consistent analysis may be developed along two coordinates of debt: sustainability/unsustainability, and efficiency/inefficiency. "High" and "low" debt/GDP ratios may equally be efficient and sustainable. On the other hand, debt may be sustainable but inefficient (sub-optimal growth), or sustainable and efficient ex-ante but unsustainable ex-post, or inefficient and unsustainable. |
| Keywords: | public debt, debt burden, debt sustainability, economic growth, endogenous growth models |
| JEL: | E62 H63 O40 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11503 |
| By: | , samok66696@rustetic.com |
| Abstract: | Foreign Direct Investment (FDI) inflows play a crucial role in the ASEAN (Association of Southeast Asian Nations) region's economic growth, as they contribute capital, technology, managerial expertise, and enhance economic integration among member states. However, FDI distribution across ASEAN countries is uneven, with larger and more open markets receiving a larger share, while smaller or less developed countries attract less investment. This research aims to identify the determinants of FDI inflows in the ASEAN-10 region from 2010 to 2021. A quantitative approach is employed, utilizing panel data regression analysis. The models tested include the Common Effect Model (CEM), Fixed Effect Model (FEM), and Random Effect Model (REM), with the FEM selected as the most appropriate. The results of the partial test reveal that economic growth and regulatory quality positively influence FDI inflows in ASEAN-10, while the Voice and Accountability indicator has a negative effect. Conversely, political stability, government effectiveness, rule of law, and control of corruption do not significantly impact FDI inflows. Overall, these variables account for approximately 87.20% of the variance in FDI flows in the region. The findings suggest that ASEAN countries should formulate more effective policies to attract FDI, particularly by implementing sound economic strategies, enhancing institutional quality, improving the investment climate, and boosting global competitiveness. |
| Date: | 2024–12–12 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:7ge9z |
| By: | Jeffrey H. Bergstrand; Jordi Paniagua |
| Abstract: | Over the past 30 years, “deep trade agreements” (DTAs) have proliferated. DTAs go beyond traditional preferential trade agreements focused historically on reducing tariff rates on goods trade, influencing the behavior of exporting firms and multinational enterprises (MNEs) via a broad swath of “provisions.” However, estimation of individual effects of several hundred provisions in DTAs on trade using the World Bank’s DTA database remains in its infancy. While this database categorizes substantive provisions between liberalizations vs. obligations, this paper is the first to use the Shapley Value approach from cooperative game theory to generate unbiased estimates of the signs of all individual provisions’ partial effects. First, we find ex post evidence that (the World Bank’s) “liberalizations” can have positive or negative effects on trade and “obligations” can have negative or positive effects. Our approach generates precise estimates of the positive-versus-negative effects of narrow sets of provisions, while addressing challenges posed by omitted-variables, over-aggregation, and multi-collinearity biases. Second, in contrast to most studies that focus exclusively on trade effects of DTAs, we introduce a new data set on MNEs to inform us of DTA provisions’ effects on MNEs’ bilateral FDI, costs, employment, revenues, and assets – alongside provisions’ effects on trade – which are of importance to MNEs’ managements and governments’ policymakers. Third, we find convincing evidence that provisions that positively (negatively) affect trade flows also negatively (positively) affect FDI flows, suggesting that trade and FDI are predominantly substitutes with respect to DTAs’ provisions. Finally, we provide computable general equilibrium welfare estimates associated with several policy counterfactuals. |
| Keywords: | international trade, foreign direct investment, multinational enterprises, foreign affiliate sales, deep trade agreements |
| JEL: | F10 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11526 |
| By: | Bernini Federico Gastón; Donaldson Paula; Garcia-Lembergman Ezequiel; Juárez Leticia |
| Abstract: | In the past two decades, over 30 countries have implemented tax amnesty policies to encourage the declaration and repatriation of hidden assets, with the goal of increasing government tax revenues. While previous literature has primarily focused on the fiscal impact, this paper studies a new channel: the potential expansion of the financial sector resulting from these policies. We examine the macroeconomic effects of Argentina's 2016 Tax Amnesty, one of the largest programs for disclosing hidden assets, through the financial channel. This amnesty led to an influx of savings into domestic banks, primarily in dollars, equivalent to 1.4% of GDP. We leverage the heterogeneous exposure of banks and firms to this amnesty-induced financial shock to identify bank responses and the spillovers to firms in the private sector. We find that more exposed banks significantly increased their lending compared to less exposed ones. Firms connected to banks with higher exposure experienced increased borrowing, along with a boost in imports, exports and employment. Our findings reveal that tax amnesty policies can stimulate economic growth by expanding the financial sector, demonstrating effects beyond their direct fiscal impact. These results are particularly relevant for countries with underdeveloped financial systems, where the potential for growth through improved access to capital is significant. |
| JEL: | H0 L5 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:aep:anales:4710 |
| By: | Rapetti, Martin |
| Abstract: | This article analyzes economic crises in Latin America (LA) from the 1970s to the 2000s, focusing on two major waves: the "lost decade" of the 1980s and the crises of the 1990s and early 2000s. Both waves followed periods of strong capital inflows, a common feature in developing countries facing financial turmoil. LA’s early integration into international capital markets and frequent crises offer a unique opportunity for comparative analysis. The paper also explores the absence of major crises during the early 2000s, despite intensified capital inflows, and examines the role of fiscal policy and sound macroeconomic management in mitigating vulnerabilities. |
| Keywords: | crisis, exchange rate, balance of payments, debt, Latin America |
| JEL: | F4 F41 O54 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123169 |
| By: | Pérez Caldentey, Esteban |
| Abstract: | The United States dollar has increased its importance as an international medium of exchange, maintained its strength as a store of value and reinforced its role as the world’s unit of account. At the same time the capital market has become a major source of funding throughout the world including for developing countries. This context has major financial implications for the United States and for those countries, mainly developing countries, that are anchored to the dollar. These implications are brought to the fore by focusing on some of the main transmission mechanisms of international financial conditions to developing countries and by analyzing the components of the external balance sheets for the United States and for developing countries. The analysis is placed within the context of some of the changes that have occurred in the international financial system and in the composition of international financial flows in the aftermath of the Global Financial Crisis. |
| Date: | 2024–12–31 |
| URL: | https://d.repec.org/n?u=RePEc:ecr:col035:81187 |
| By: | Acedański, Jan; Dąbrowski, Marek A. |
| Abstract: | This paper provides novel insights into the Feldstein-Horioka puzzle. The famous finding of Feldstein and Horioka (1980) is that despite perfect international capital mobility, domestic saving does not flow among countries to equalise yields but instead is tightly related to domestic investment. We observe that the link between empirical results and their theoretical foundations rarely goes beyond the saving-investment identity, and the research is dominated by empirical approaches coupled with advanced econometric techniques. This paper harnesses open economy macroeconomic models to demonstrate that the saving-retention coefficient informs about the relative importance of shocks rather than the degree of international capital mobility. Using the Monte Carlo experiments and the open economy RBC model, we show that the dominance of spending and foreign shocks moves the distribution of the estimated coefficient towards zero, whereas the prevalence of investment (productivity) shocks shifts the distribution towards one. On the empirical side, we proxy shocks to saving with debt and current account surprises constructed from the IMF's forecasts and employ them to instrument the saving ratio. Using the CCE estimator, we uncover that, in line with the theoretical framework, the saving-retention coefficient is significantly lower in the instrumental variable regressions than in the regressions without instruments. Finally, we replicate the puzzling finding that investment-saving correlations are higher in advanced economies than in emerging market economies only in a few regressions without instrumentation and demonstrate that the difference disappears when the endogeneity of the saving rate is adequately remedied. |
| Keywords: | Feldstein-Horioka puzzle; capital mobility; capital flows; open economy macroeconomics; saving and investment |
| JEL: | E44 F32 F41 G15 |
| Date: | 2024–11–27 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122800 |
| By: | Wandia, Elizabeth; Muathe, Stephen Makau |
| Abstract: | Commercial banks are facing a decline in revenues, indicating a potential downward trend. Banks have experienced intensified competition leading them to tap into foreign capital and expand their market internationally. In Kenyan banks, there has been a decline in the ROE from 26.6% in 2014, 25.2% in 2015, 24.5% in 2016, 21.8% in 2019 and finally 13.9% in 2020. The study sought to establish the effect of business globalization on performance of commercial banks in Kenya. The objectives were to analyze the effects of market liberalization, technological advancements, competitive intensity, and global financial integration. Descriptive research design was employed. The target population was all 39 banks in Kenya. The units of observation were the 1226 staff. Multiple linear regression was used in analysis employed. The study found that monetary policy, interest rate liberalization, and financial system changes have significant impact on commercial banks' performance. Technological innovations, Research and development, innovation, spread of new ideas and number of patents granted contributes to the success of banks in the region. Intensity of competition, brand preferences, business aesthetics greatly and expansion of the economy greatly affect the performance banks. Banks need to establish robust liberalized markets that provide easier access to global markets. The banks management should focus on increasing investments in patenting, digital innovation, and research and development to connect with the unbanked segments of the global market. |
| Date: | 2024–12–12 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:nscq3 |
| By: | Cândida Ferreira |
| Abstract: | This paper empirically tests the two competing hypotheses regarding the relationship between competition and stability: the competition-fragility hypothesis and the competition-stability hypothesis. The banking sector stability is first proxied by the estimated Z-score that provides a measure of overall bank stability. Further, the paper separately considers some specific constituent components of the Z-score measure to analyse different aspects of the bank stability: bank profitability and bank capitalisation. Two different measures are used to represent bank competition: the Herfindahl-Hirschman Index (a specific measure of market concentration), and the Boone indicator (which measures competition from an efficiency perspective). Using data sourced from the Moody’s Analytics BankFocus database, the paper applies panel estimations to a relatively large panel including 784 relevant banks of all the 27 European Union countries, between 2006 and 2021. The main findings overall confirm the validity of the competitionfragility hypothesis. Moreover, the results obtained for two specific EU countries: Germany and France, highlight some specific differences in particular regarding the effects of bank market concentration, and the responses to the crises that affected the EU banking institutions over the considered period. The findings of this paper reinforce the relevance of the policy makers’ role and give room to some recommendations. |
| Keywords: | Bank stability: bank competition; Z-score; Herfindahl-Hirschman Index; Boone indicator; EU banking sector. |
| JEL: | C33 D53 F36 G21 |
| Date: | 2023–02 |
| URL: | https://d.repec.org/n?u=RePEc:ise:remwps:wp02612023 |
| By: | Alonso, Ricardo; Zachariadis, Konstantinos E. |
| Abstract: | A regulator who designs a public stress test to avert default of a distressed bank via private investment must account for large investors' private information on the bank's state. We provide conditions for crowding-in (crowding-out) so that the regulator offers an endogenous more (less) informative signal to better-informed investors. We show that crowding-in occurs as long as investors remain responsive to public news and they are sufficiently well informed: the regulator's test perfectly reveals the state as investors' become privately perfectly informed. Investors' value from more precise private signals may come from their effect on the public test's precision. |
| Keywords: | information design; Bayesian persuasion; stress tests; financial disclosure; endogenous public signal |
| JEL: | D83 G21 G28 |
| Date: | 2024–12–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:126040 |
| By: | Jyotsana Kala; Lucie Lebeau; Lu Wang |
| Abstract: | We study the dynamic interplay between monetary policy and market power in a decentralized monetary economy. Building on Choi and Rocheteau (2024), our key innovation is to model rent seeking as a process that takes time, allowing market power to evolve gradually. Our model predicts that a gradual reduction in the nominal interest rate causes a simultaneous increase in rent-seeking effort and producers’ market power, consistent with the stylized correlation observed in the U.S. over the last few decades. Producer entry can however reverse this relation in the short run, and neutralize it in the long run. Indeterminacy and hysteresis emerge when consumers benefit from valuable outside options, with short-run monetary policy shocks potentially locking the economy into high- or low-market-power equilibria in the long run. |
| Keywords: | search; money; market power; monetary policy |
| JEL: | D82 D83 E40 E50 |
| Date: | 2025–01–07 |
| URL: | https://d.repec.org/n?u=RePEc:fip:feddwp:99409 |
| By: | Gobbi, Lucio; D'Ippoliti, Carlo; Temperini, Jacopo |
| Abstract: | In this paper we analyze the impact of less conventional monetary policy tools on the personal and functional distribution of income. We focus on the issuance of central bank digital currency (CBDC) in a comparative perspective, using a stock-flow consistent model of the eurozone economy. We consider two kinds of policies: helicopter money policies such as Quantitative Easing and the issuance of a CBDC; and scenarios not based on balance sheet expansions, such as an interest rate policy following the Pasinetti Rule, or a sterilized issuance of CBDC. Monetary policies using CBDCs tend to increase the wage share at the expense of financial rents. The targeted issuance of CBDCs to firms might produce an increase in GDP, corporate profits, and the wage share. The Pasinetti Rule reduces personal income inequality the most, but if applied mechanically, its impact on growth is also the least desirable. |
| Keywords: | Inequality; Monetary policy; Central Bank Digital Currencies; Pasinetti Rule |
| JEL: | E12 E5 G0 I3 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122934 |
| By: | Aloisio Araujo; Juan Pablo Gama; Timothy J. Kehoe |
| Abstract: | We study the dynamic properties of the wealth distribution in an overlapping generations model with warm-glow bequests and heterogeneous attitudes towards risk. Some dynasties of agents are risk averters, and others are risk lovers. Agents can invest in two types of Lucas trees. The two types of trees are symmetric in the sense that one type has a high return in states where the other has a return of zero. This symmetry allows risk averters to perfectly ensure their future income and eliminates aggregate uncertainty in the model. Furthermore, risk lovers take extreme portfolio positions, which make it easy for us to characterize the evolution of their wealth holdings over time. We show that the model has an equilibrium in which the aggregate wealth distribution converges to a unique invariant distribution. The invariant distribution of wealth of the risk lovers has fat tails for high bequest rates. The existence of fat tails is endogenously generated by the behavior of risk lovers rather than by the exogenous existence of fat tails in the endowments or in the returns of the assets. |
| JEL: | C62 D51 D53 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33298 |
| By: | Cristian Alcaraz (Fondo Latinoamericano de Reservas); Miguel Cabello (CUNEF Universidad); Rafael Nivín (Banco Central de Reserva del Perú) |
| Abstract: | Conocer los movimientos cíclicos de variables macro-financieras, como el crédito, es relevante no sólo por conocer si enfrentamos un evento de sobrecalentamiento del sector financiero, sino también para proponer medidas de corte macroprudencial, a fin de evitar movimientos extremos en el ciclo financiero. En este estudio nos enfocamos en medir los cambios cíclicos de distintas medidas de crédito, tanto en logaritmos como en ratios respecto al PBI, y por tipos de crédito y monedas. Entre los resultados a resaltar encontramos que: (i) el crédito en moneda extranjera presenta al menos un ciclo más que el crédito en moneda nacional, lo que evidencia la necesidad de monitorear la evolución cíclica del crédito tanto a nivel a agregado como por componentes (tanto por monedas como por tipo de crédito) (ii) Las distintas medidas cíclicas del crédito no sugieren una alta correlación dinámica con el ciclo del PBI, lo cual implicaría que una medida macroprudencial basada en el ciclo del PBI como proxy del ciclo del crédito podría limitar su efectividad para atenuar eventos de sobrecalentamiento del crédito. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:rbp:wpaper:2024-022 |
| By: | Katsafados, Apostolos G.; Leledakis, George N.; Panagiotou, Nikolaos P.; Pyrgiotakis, Emmanouil G. |
| Abstract: | We combine machine learning algorithms (ML) with textual analysis techniques to forecast bank stock returns. Our textual features are derived from press releases of the Federal Open Market Committee (FOMC). We show that ML models produce more accurate out-of-sample predictions than OLS regressions, and that textual features can be more informative inputs than traditional financial variables. However, we achieve the highest predictive accuracy by training ML models on a combination of both financial variables and textual data. Importantly, portfolios constructed using the predictions of our best performing ML model consistently outperform their benchmarks. Our findings add to the scarce literature on bank return predictability and have important implications for investors. |
| Keywords: | Bank stock prediction; Trading strategies; Machine learning; Press conferences; Natural language processing; Banks |
| JEL: | C53 C88 G00 G11 G12 G14 G17 G21 |
| Date: | 2024–10 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122899 |
| By: | Gaganis, Chrysovalantis; Leledakis, George N.; Pasiouras, Fotios; Pyrgiotakis, Emmanouil G. |
| Abstract: | We use a comprehensive cross-country sample to investigate whether and how the country-level social capital influences the firm-level stock price crash risk. We document a negative and statistically significant effect, which is robust to various tests including IV estimations that account for endogeneity concerns. When we disaggregate social capital into its various components, we find that the results are driven by civic and social participation, institutional trust, and family relationships, whereas social networks and interpersonal trust do not appear to matter. Furthermore, we find that the impact of social capital is channeled through firm-level reporting opacity and price informativeness. Finally, the impact of social capital on stock price crash risk is moderated by formal institutions, like property rights and law and order. |
| Keywords: | Stock price crash risk; Social capital; Informal institutions; Formal institutions |
| JEL: | G0 G12 G14 G15 Z13 |
| Date: | 2024–11 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122896 |
| By: | Choudhury, Nafay |
| JEL: | F3 G3 |
| Date: | 2022–12–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:123576 |
| By: | Shashwat Alok; Pulak Ghosh; Nirupama Kulkarni; Manju Puri |
| Abstract: | Does the ability to generate verifiable digital financial histories, with customers having data-sharing rights, improve credit access? We answer this using India’s launch of an Open-Banking based public digital payment infrastructure (UPI). Using rarely available data on the universe of consumer loans we show credit increases by both fintechs (new entrants) and banks (incumbents), on the intensive and extensive margin, including increased credit to subprime and new-to-credit customers. We show several mechanisms at play: low-cost internet improves credit access, lenders weigh in digital histories, and digital payments with Open Banking effectively complement first-time bank accounts enabling access to formal credit. |
| JEL: | D14 G24 G28 G51 J15 R21 R23 R31 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:33259 |
| By: | Immaculate, Nakalembe; Muathe, Stephen M. A; Maina, Samuel |
| Abstract: | Youth-owned micro, small, and medium businesses face various constraints while accessing financial services in Uganda. Various stakeholders have assisted these enterprises in accessing finance at better conditions but their non- financial performance has continued to deteriorate. This study tried to investigate the effect of access to financial services on non-financial performance of youth-owned MSMEs in Mukono district, Uganda. Specific objectives included effect of bank, branch network, financial information, loan accessibility and financial technology on non-financial performance of youth-owned micro, small and medium enterprises. The study's guiding theories were the resource-based view, dynamic capability, and innovation of entrepreneurship theories. A positivism research philosophy and explanatory research design were used. The target population was 3717 registered MSMEs. A sample size of 400 was obtained using both stratified and simple random sampling methods. Primary data was collected using questionnaires, analyzed using multiple regression analysis. The study's findings revealed that financial information, bank branch networks, loan accessibility, and financial technology had a positive and significant effect non-financial performance of youth-owned MSMEs. The study concluded that access to financial services is critical to non-financial performance of youth-owned MSMEs in Mukono district, Uganda. The study recommends that youth-owned MSMEs should first gather reliable information about operations of financial service providers to avoid being charged hefty penalties and interests, branch expansion to provide greater supply of credit in order to improve the non-financial performance of youth-owned MSMEs. The study further recommends that financial institutions should reduce collateral requirements in order to increase micro-credit loan uptake by the youth who own MSMEs. |
| Date: | 2024–12–15 |
| URL: | https://d.repec.org/n?u=RePEc:osf:osfxxx:5ek6f |
| By: | Paul S. Calem; Chris Henderson; Jenna Wang |
| Abstract: | This paper conducts a detailed exploration of the factors associated with unbanked status among U.S. households and how these relationships evolved between 2015 and 2019. Biennial FDIC household survey data on bank account ownership and household characteristics, combined with state-level variables, are examined with application of both fixed effects and multilevel modeling. The analysis finds that even as rising incomes drove a decline in the unbanked percentage of the population over this period, income remained the most significant differentiator, with strong associations with race and ethnicity also persisting. Unbanked status became more concentrated among single individuals and disabled individuals and less concentrated among younger households over this period, and less strongly related to unemployment spells. New factors identified by the analysis include lack of digital access and non-citizen immigrant status, both associated with significantly higher likelihood of being unbanked. Identified state-level relationships include an association between financial literacy measures and percent unbanked. Overall, the findings suggest that continuation of recent efforts by policymakers to bridge the digital divide in rural and urban areas and to enhance financial literacy could help expand financial inclusion. Another key takeaway is that unknown structural factors still pose a challenge to explaining who is unbanked, especially regarding gaps by race and ethnicity, underscoring a need to capture more granular data on the unbanked. |
| Keywords: | unbanked; consumer banking; financial inclusion; financial literacy; multilevel modeling |
| JEL: | D14 D31 G21 G53 C81 C83 |
| Date: | 2025–01–16 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedpwp:99465 |