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on Financial Development and Growth |
| By: | Enikolopov, Ruben; Kirschenmann, Karolin; Schoors, Koen; Sonin, Konstantin |
| Abstract: | How does government control over mass media affect banking system? Our theoretical model predicts that if the media are biased, depositors are less likely to run on their bank, but also less likely to deposit their money in the banking system in the first place. Empirically, we show that countries with more media freedom experience both more frequent banking crises and higher levels of financial development. We pin down the underlying mechanism with a case study from Russia's 1998 banking crisis. Banks in areas with more access to an independent TV channel saw their depositors return faster in the aftermath of the crisis, in line with the reasoning that the crisis revealed differences in media bias across TV channels and induced differences in financial development at the bank level. |
| Keywords: | bank runs, systemic stability, media freedom, information manipulation |
| JEL: | G01 G21 G51 H12 L82 O16 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:zewdip:312573 |
| By: | Nieminen, Mika; Norring, Anni |
| Abstract: | Countries choose diverse policy mixes of macroprudential and capital flow management measures, yet the drivers behind these policy choices remain largely unexplored. We identify potential conditions for the adoption and determinants of the use of macroprudential and capital flow management measures from the theoretical literature and test them empirically. Rich and high-growth economies tend to rely on macroprudential policy measures, while the use of capital flow management measures decreases as the regulatory environment improves. Countries with a large foreign bank presence tend to implement fewer macroprudential and capital flow management measures. |
| Keywords: | Macroprudential policy, Capital controls, Foreign banks |
| JEL: | E58 F33 F38 G28 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bofitp:315479 |
| By: | Jiménez Sotelo, Renzo |
| Abstract: | This article contains an essay on the negative empirical relationship between bank profitability and economic development. The working hypothesis is that this relationship is caused by the social (in)efficiency with which the different banking sectors operate. The argument uses public information from the first two decades of the 21st century for almost one hundred and a half countries on the five continents. The topic, although it may seem very specialized, is of general interest. Firstly, because, within the current capitalist economic system, almost no sector of the economy can remain outside the world of finance. And secondly, because the profitability of the financial sector, as a whole, is the result of the degree of (in)efficiency with which it provides its services to the rest of the economic sectors. In theory, financial companies, in general, and banking companies, in particular, should mediate the greatest amount of funds possible in order to be able to more efficiently fulfill their central function (facilitate the allocation and deployment of the economic resources existing in each country), which enables greater economic development. To this end, banks must: (i) encourage the greatest possible domestic savings and (ii) finance investment in all low-risk projects, since high-risk projects require other types of financiers, or even partners. However, banking sectors stop operating as efficiently as they could when, in order to increase their profitability, they widen the differentials between their interest rates as much as possible, or even encourage the partial dollarization with which they operate. These practices mean that: (i) savings in national currency are discouraged by the low real returns provided to savers, (ii) low-risk projects are not financially viable, since, by their nature, they have lower returns, and (iii) economies are more vulnerable to the unpredictable change in the risk appetite of foreign capital and its overflow through the evolution of the exchange rate. |
| Keywords: | Banking; business cycle; financial development; banking spread; income equity; financial system. |
| JEL: | D63 E32 E43 G21 O16 |
| Date: | 2024–07–11 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122367 |
| By: | Perez-Reyna, David; Rodríguez Barraquer, Tomás; Tovar, Jorge |
| Abstract: | In this paper, we analyze the competition in the Colombian banking sector using bank-level monthly balance sheet information. We estimate the changes in measures of market power due to the exogenous introduction of a liquidity regulation. Our results suggest that introducing a net stable funding ratio increased the Lerner index in the short term, thus signaling a higher exercise of market power. We rationalize these changes in a simple theoretical model that allows us to analyze the tightening of liquidity requirements for banks. Our empirical results are consistent with banks with higher market power in the loan market than in the deposit market. |
| Keywords: | Competition;Banking sector;Liquidity regulation |
| JEL: | E44 G21 L13 |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:idb:brikps:14045 |
| By: | Francesco D'Acunto; Janet Gao; Lu Liu; Kai Lu; Zhengwei Wang; Jun Yang |
| Abstract: | Using a customized survey and an information-provision experiment, we establish that loan officers’ individual subjective expectations about inflation, GDP growth, and policy rates vary substantially within and across bank types and have a sizable causal effect on credit supply decisions. Decisions about loan issuance and pricing exhibit large heterogeneity based on loan officers’ subjective expectations even for the same borrower assessed at the same time. Moreover, officers with rosier macroeconomic expectations penalize less borrowers with worsening fundamentals than do officers with more pessimistic expectations. Our findings have implications for theories of financial intermediation and reveal an overlooked human-based friction to the transmission of monetary policy. |
| Keywords: | credit supply, financial frictions, behavioral macroeconomics, behavioral finance, monetary policy, banking, micro-to-macro, randomized control trials, surveys. |
| JEL: | D84 D91 E44 G21 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11780 |
| By: | Thomas Lejeune (Economics and Research Department, National Bank of Belgium); Jolan Mohimont (Economics and Research Department, National Bank of Belgium) |
| Abstract: | We extend the reference DSGE model used for policy analysis at the NBB with a financial sector, by incorporating multi-period fixed-rate corporate and mortgage loans, an imperfect pass-through from policy rates to the deposit rate, and bank capital re-quirements. Adding multi-period fixed-rate loans amplifies the propagation of default risks and strengthens the effectiveness of macroprudential policy. This amplification operates through a bank capital channel and a market timing effect that delays borrowing and investment when rates are expected to fall. The bank capital channel also propagates shocks across sectors, and amplifies the effects of monetary policy when the duration of banks’ assets is larger than that of their liabilities. With universal banks, that grant both corporate and mortgage loans, sectoral prudential policy instruments can have unintended consequences on credit supply in the untreated sector. These crowding out effects increase with the loan duration in the treated sector and decrease with the risk weight differential between the treated and untreated sectors. Finally, we apply our model to the mortgage risk weight add-on introduced by the NBB in 2013. |
| Keywords: | Macroprudential policy, credit risks, loan maturity, financial accelerator, sectoral spillovers, unintended consequences, DSGE. |
| JEL: | E3 E44 E5 G21 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:nbb:reswpp:202504-474 |
| By: | Hayk Sargsyan (Universitat Pompeu Fabra); Aleksandr Grigoryan (SKEMA Business School, Université Côte d'Azur, France.); Olivier Bruno (Université Côte d'Azur, CNRS, GREDEG, SKEMA Business School, France) |
| Abstract: | In this paper we develop a model which explains exclusion from deposits market and the emergence of premium banks. Households' demand for deposits is modelled accounting for diversification motive and love for services. Market exclusion and the emergence of premium banks occur, if the diversification motive dominates. Too unequal distribution of income directed to deposits leads to the exclusion of poor from rich-serving banks' deposit product markets, resulting in higher markups and a lower level of total deposits. In the empirical part, we use a bank-branch level data and county level income inequality as a proxy for deposits inequality for the U.S. economy. We find supporting evidence for the main assumptions of the theoretical model, which are (i) price elasticities di er for rich and poor, (ii) premium banks set higher deposit prices, (iii) the likelihood of the emergence of premium banks increases in income inequality, and (iv) the total volume of deposits decreases in income inequality. |
| Keywords: | Market exclusion, premium banks, deposit price, deposit-holdings inequality, non-homothetic preferences |
| JEL: | D31 D43 E52 G21 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-10 |
| By: | Yao, Koffi Yves; Kouakou, Auguste Konan |
| Abstract: | This paper analyses the effect of remittances on inclusive human development in sub-Saharan Africa. It considers the conditional effects of ICT, dual nationality, and financial development within this relationship. Estimates were derived using Population-Averaged Generalised Estimating Equations (PA-GEE), Fixed Effects Instrumental Variable (FEIV), and Method of Moments-Quantile Regression (MM-QR) on a panel of 31 countries over the period 2010–2017. The findings indicate that remittances positively contribute to inclusive human development. The interaction between remittances, financial development, and ICT further enhances this impact, as does dual citizenship. These results are robust and suggest that ICT through collaboration between migrants and their country of origin, laws favouring multiple citizenship, an efficient financial system and a business-friendly institutional environment, optimises the effect of remittances on inclusive development in sub-Saharan Africa. |
| Keywords: | Remittances, Inclusive Development, Human Development, Transnationalism, Sub-Saharan Africa |
| JEL: | F24 K37 O15 O33 O55 |
| Date: | 2025–02–19 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:123713 |
| By: | Shujaat Khan; Bo Li; Mr. Yunhui Zhao |
| Abstract: | We highlight the strong connection between developing fully-funded, individually-owned, collectively-managed, mandatory/incentivized (FICMI) pension schemes and the development of domestic stock markets. We do so by building a stylized model and complementing the analysis with cross-country empirical analysis and case studies. We also highlight the challenges of individual impatience, network externalities, and coordination failure in long-term equity investments, which are crucial for stock market development and technological innovation. We find that FICMI pension schemes—when sufficiently wide in coverage and large in size—can serve as coordination devices to support long-term equity investments. Such investments will not only promote domestic stock market development and make it easier for firms to raise long-term equity capital, therefore supporting long-term economic growth, but also enhance financial inclusion and enable more households to benefit from the overall economic development, therefore contributing to inclusive growth. Moreover, we find that the introduction of FICMI pension schemes can impact household savings in two ways: first, FICMI pension can increase household savings through “forced/incentivized” savings channel, where households save too little without FICMI pension (such as in many EMDEs); and second, FICMI pension can decrease household savings and increase household consumption by reducing non-pension savings and decreasing precautionary savings, where households save too much without FICMI pension (such as in China). In both cases, FICMI pension schemes can help move the economy closer to the optimal level of household savings, and may also help improve the structure of such savings. Finally, we discuss the enabling conditions (such as a strong political commitment to the reform and a well-designed fiscal strategy for financing the transition) and policy design for FICMI pension schemes. |
| Keywords: | Pension Reforms; Stock Market Development; Equity Financing; Innovation' Financial Inclusion; Intertemporal Optimization; Public Pensions; Funded and Private Pensions |
| Date: | 2025–02–28 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/049 |
| By: | Li, Jieying (Financial Stability Department, Central Bank of Sweden); Myers, Samantha (Financial Stability Department, Central Bank of Sweden) |
| Abstract: | The global non-bank sector has experienced significant growth since the global financial crisis, raising concerns that this shift represents a financial stability risk. We consider the drivers of this growth in Sweden: a small, open economy whose non-bank sector has grown rapidly. In contrast with the existing literature for the US, we find no evidence that growth in the Swedish non-bank sector is driven by regulatory arbitrage from banks. Instead, we find that the main drivers are the growing and increasingly complex pension investments, together with returns on global equity markets. While this provides some evidence that growth may be driven for search for yield, we also find that the non-bank sector appears to make its global investment choices on relatively conservative grounds. We conclude that trend-consistent growth may be driven by different factors depending on the jurisdiction. Our findings do not rule out financial stability risks, but further work is required to assess other channels by which these risks could propagate, including further analysis of cross border non-bank activities. |
| Keywords: | non-bank financial institutions; cross-border capital flows; shadow banking; regulatory arbitrage |
| JEL: | F32 F41 F44 G15 G18 G22 G23 G28 |
| Date: | 2025–02–01 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:rbnkwp:0448 |
| By: | Mr. Serhan Cevik |
| Abstract: | The rise of financial technologies—fintech—could have transformative effects on the financial landscape, expanding the reach of services beyond the confines of geography and creating new competitive sources of finance for households and firms. But what makes fintech grow? Why do some countries have more financial innovation than others? In this paper, I use a comprehensive dataset to investigate the emergence and spread of fintech in a diverse panel of 98 countries over the period 2012–2020. This empirical analysis helps ascertain economic, demographic, technological and institutional factors that enable the development of fintech. The magnitude and statistical significance of these factors vary according to the type of fintech instrument and the level of economic development (advanced economies vs. developing countries). Finally, these findings reveal that policies and structural reforms can help promote financial innovation and cultivate fintech ventures—particularly by strengthening technological and institutional infrastructures and reducing cybersecurity threats. |
| Keywords: | Fintech; financial innovation; technological change |
| Date: | 2025–02–21 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/044 |
| By: | Donato, Santiago Andrés |
| Abstract: | Esta investigación tiene como objetivo analizar los determinantes del comportamiento del precio del Bitcoin mediante la aplicación de un modelo VAR que incluye variables macroeconómicas y del mercado del Bitcoin. A través de este análisis, se busca identificar y evaluar la importancia relativa de cada uno de estos factores en la evolución del precio del Bitcoin, y examinar cómo se interrelacionan estos componentes en el contexto del mercado de las criptomonedas. Los resultados obtenidos sugieren que existen relaciones causales significativas entre el precio del Bitcoin y algunas variables macroeconómicas y del mercado del Bitcoin. Además, las relaciones encontradas apoyan parcialmente algunas de las hipótesis planteadas, lo que sugiere que el precio del Bitcoin está influenciado por factores tanto internos como externos al mercado de las criptomonedas. |
| Keywords: | Criptoactivos; Volatilidad; Precios; Análisis Econométrico; |
| Date: | 2023–09–27 |
| URL: | https://d.repec.org/n?u=RePEc:nmp:nuland:4262 |
| By: | Mr. Marco Pani; Mr. Rodolfo Maino |
| Abstract: | Private and public agents’ plans and actions to introduce digital currencies and other innovative payment instruments could produce some unintended consequences, including the potential disappearance of physical cash. This study employs a two-sided market model to examine how payment systems might respond to new currencies. Numerical simulations indicate that the success of a new currency hinges on a large-scale launch. However, even unsuccessful attempts could disrupt existing systems, potentially resulting in the elimination of cash. If cash plays a critical role as a safeguard, regulatory and monetary authorities should give due consideration to ensure its continued availability when payment innovations are introduced. |
| Keywords: | Payment systems; two-sided markets; digitalization; digital currencies; technological innovation |
| Date: | 2025–03–21 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/056 |
| By: | Frank van der Horst; Anneloes van Gent |
| Abstract: | The national central banks of the Eurosystem are investigating the possibility of issuing a retail central bank digital currency (CBDC) – the digital euro – alongside cash. The digital euro would be subject to a holding limit, meaning there would be limit to the amount of digital euro an individual can hold. A holding limit would prevent excessive outflows from the banking system, which could endanger financial stability. For the offline digital euro, a specific consideration for setting a holding limit is also to mitigate anti-money laundering/ countering the financing of terrorism (AML/CFT) risks. At the same time, given that the digital euro is a public means of payment, it is important that everyone is able to use it. A holding limit should therefore not hamper the usability of the digital euro. In existing research on CBDC, this user-centred perspective to holding limits has received limited attention. The added value of this study lies in taking a user-centred perspective. De Nederlandsche Bank conducted an experiment on offline digital euro holding limits among 2, 000 adult participants in the Netherlands. |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:dnb:dnbocs:2502 |
| By: | Sosso Feindouno (FERDI - Fondation pour les Etudes et Recherches sur le Développement International); Patrick Guillaumont (FERDI - Fondation pour les Etudes et Recherches sur le Développement International) |
| Abstract: | Following the Paris Summit for a Global Financial Pact and the United Nations resolution on the adoption of a Multidimensional Vulnerability Index (MVI), multilateral development banks (MDBs) have been called upon to integrate structural vulnerability into the allocation of their concessional resources. Assessing their commitment and accountability cannot be limited to examining the tools and allocation rules they have adopted; it is also necessary to analyse ex post the extent to which financial flows have actually been directed according to the structural vulnerability of recipient countries. |
| Keywords: | multilateral vulnerability index, development banks |
| Date: | 2025–03–17 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-04994680 |
| By: | Xu, Mohan; Tang, Yao |
| Abstract: | In the current study, we document a steady rise in the share of renewable energy projects in China's outward direct investment (ODI) in the energy sector. We examine the driving forces and find that both host country's environmental regulation and financial factors has generated different or even opposite effects on China's ODI in fossil fuels and renewable energy. Specifically, China's ODI in fossil fuels is positively correlated with endowments in fossil fuels, electricity consumption, low financing costs, and high exchange rate volatility. In comparison, ODI in renewable energy is more likely to occur in host countries with stricter environmental regulation and less likely to be impeded by tighter monetary policy. The results suggest that the combination of regulatory policies and financing conditions can have an important influence in the global transition to renewable energy. |
| Keywords: | direct investment, fossil fuels, renewable energy, environmental regulation, monetary policy, exchange rate volatility |
| JEL: | E43 F21 Q40 |
| Date: | 2025–04–02 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124270 |
| By: | Yuanchen Cai (Boston College); Pablo Guerron-Quintana (Boston College) |
| Abstract: | This paper studies the macroeconomic consequences of asymmetric interest rate shocks at which small open economies borrow in international financial markets. Empirically, we document that borrowing spreads have two distinct regimes. The first one features stable borrowing rates, i.e., low risk. In contrast, the second phase displays large spreads with significant volatility and –asymmetry, high risk. We fit the spreads to a rich statistical process that allows for changes in the level, volatility, skewness and kurtosis of the spread’s distribution. Each of the spread regimes is estimated to be highly persistent. When we embed the estimated spreads in a standard small-open economy model, we find that 1) spread shocks alone explain a large fraction of the volatility in consumption and investment in the data; 2) interest shocks of similar magnitude have stronger contractionary effects in an economy where only low risk exists than in one with changes between high and low risk; 3) the transition from an economy with only low-risk interest rate shocks to one like in the data results in a significant and persistent contraction. The welfare cost of this transition equals 2.4% of consumption. Finally, an unexpected increase in skewness pushes the economy into a recession with output, consumption, and investment dropping by as much as 1%, 2%, and 5%, respectively. This contraction resembles those experienced by developing countries during sudden stop episodes. |
| Keywords: | Borrowing spreads, risk, skewness, business cycles, welfare cost, sudden stops |
| JEL: | F4 C2 |
| Date: | 2025–04–16 |
| URL: | https://d.repec.org/n?u=RePEc:boc:bocoec:1088 |
| By: | Manabu Nose; Jeta Menkulasi |
| Abstract: | Domestic sovereign bonds have become a growing source of government financing in Emerging Market and Developing Economies (EMDEs). This paper investigates the role of fiscal policies in determining domestic bond yields, and how this relationship varies depending on the debt structure. Specifically, the analysis highlights the interaction of fiscal policy with banking sector leverage and foreign investor holdings for government debt. A 1 percentage point increase in expected primary deficits results in a persistent increase in 10-year domestic bond yield by around 36 basis points over 2.5 years, with larger effects observed during the COVID-19 pandemic. This contrasts with external bond spreads which are more sensitive to external and global risk factors. The greater the reliance on domestic banks for deficit financing, the stronger the impact of loose fiscal policy on domestic bond yields. The shift in domestic debt financing towards domestic banks after the pandemic implies that sovereign yields have been increasingly interlinked with domestic banks’ investment behavior implying potential financial sector risks in major EMDEs. |
| Keywords: | Domestic bond yield; Fiscal discipline; Sovereign-bank nexus; Doom-loop; Debt holder composition |
| Date: | 2025–03–28 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/059 |
| By: | Batista Jr., Paulo Nogueira; Wade, Robert H. |
| Abstract: | After almost 80 years of the IMF’s existence, the distribution of influence in key decisions is still much as it was at the organization’s founding in 1945, during the era of Western colonialism - still mostly in the hands of a small set of high-income nation. It is as though the emerging “multipolarity” of the world order had not taken place. This essay sets out the imbalance between the relative “weight” of a country (or set of countries) in the world economy and the relative weight in Fund governance. After explaining the quota system and other determinants of influence (including occupancy of positions) and the history of failed attempts to change the distribution of influence, the essay outlines several measures of incremental reform which would not challenge the US, European, and Japanese grip on institution but still improve the way it works in practice and also benefit the smaller and poorer member countries in particular. However, without more radical shifts in the distribution of influence, the answer to our title question is, probably not. |
| Keywords: | international organizations; reform of the global financial architecture; International Monetary Fund; high income countries; emerging market and developing countries |
| JEL: | F00 F02 F30 F33 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127788 |
| By: | Gardner, Leigh; Husain, Tehreem |
| Abstract: | In 1924, John Maynard Keynes complained about the fact that Southern Rhodesia, which he described as “a place somewhere in the middle of Africa”, was able to raise loans on the London market on the same terms as a large English borough. Existing literature on the “empire effect” has contended that investors did not discriminate between the bond issues of different colonies, either because they adopted similar economic and financial policies or because they were considered to be subsidiary governments to metropolitan states. However, archival records suggest that this was not the case and that African bonds were particularly unpopular. Contemporaries stressed that maintaining low borrowing costs for African colonies required considerable behind the scenes interventions by the Crown Agents using reserve funds they held on behalf of other colonies. This paper presents preliminary data on the financial connections between colonies created by this practice, which it calls the “sinews” of empire, and examines the implications for debates about imperialism and financial globalisation. |
| Keywords: | sovereign debt; empire; Africa; colonialism |
| JEL: | H00 G10 |
| Date: | 2025–03–31 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:127544 |
| By: | Sahasrabuddhe, Aditi; Seddon, Jack |
| Abstract: | Recent crises have cast doubt on the legitimacy of technocratic power, yet its role in global economic governance remains poorly understood. Revisiting the collapse of Bretton Woods, we propose a dynamic theory of global monetary governance to explain how expanding central bank discretion can destabilize systems. While most studies attribute the postwar system's failure to geopolitical struggles, institutional weaknesses, or shifting economic ideas, they overlook the policies designed to manage and stabilize it. Drawing on historical institutionalism, we show how coordination tensions between rule-bound and discretionary policymakers-and the mutually reinforcing adaptation risks they faced-produced responses that appeared stabilizing in the short term but ultimately eroded long-run stability. New archival evidence from the IMF, BIS, and OECD reveals how tools like the London Gold Pool and currency swap lines extended central bank power, concealed macroeconomic imbalances, and crowded out political momentum for structural reform. As technocratic authority grew misaligned with political support and functional economic adjustment, it became a liability. This challenges the dominant view that technocratic actors are inherently superior in managing global economic policy |
| Keywords: | Bretton Woods, London Gold Pool, monetary history, monetary governance, historical institutionalism |
| JEL: | E42 E58 F33 N10 N14 N20 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:qucehw:315744 |
| By: | Lubica Stiblarova (Faculty of Economics, Technical University of Kosice, Slovak Republic); Anna Tykhonenko (Université Côte d'Azur, CNRS, GREDEG, SKEMA Business School, France) |
| Abstract: | his paper explores the intricate relationship between human capital and foreign direct investment (FDI) across 28 European countries from 2003 to 2022. To address this relationship's complex and often ambiguous nature, a Bayesian shrinkage estimator is utilized to capture significant heterogeneity across different regions. The results indicate that the discouraging role of human capital in FDI is most pronounced in the "Eastern bloc, " where cost-effectiveness serves as the primary driver of investment. In contrast, efficiency-seeking motives prevail in Western Europe, where higher levels of human capital contribute to increased FDI. Sectoral analysis further reveals that the critical transition for attracting FDI occurs not between the secondary and tertiary sectors, as traditionally believed, but between the tertiary and quaternary sectors. In these advanced sectors, quaternary FDI leverages innovation potential through high-skilled labor, underscoring the critical importance of human capital. These findings highlight the nuanced and region-specific dynamics of FDI, emphasizing the need for tailored policies to maximize the benefits of human capital in attracting foreign investment. |
| Keywords: | Human capital, foreign direct investment, regional heterogeneity, multi-speed Europe, Bayesian shrinkage estimator |
| JEL: | C11 F21 I25 O14 |
| Date: | 2025–04 |
| URL: | https://d.repec.org/n?u=RePEc:gre:wpaper:2025-11 |
| By: | Raputsoane, Leroi |
| Abstract: | This paper analyses the reaction of the minerals industry to foreign direct investment developments in South Africa. This is achieved by augmenting a Taylor1993 rule type central bank monetary policy reaction function with foreign direct investment inflows. The empirical results provide evidence of a statistically significant effect of an increase in foreign direct investment on output of the minerals industry, which briefly decreases followed by an increase and a peak out after 8 months, the effect of which is statistically significant between 6 and 14 months. The results further show a statistically significant effect of an increase in output of the minerals industry on foreign direct investment, which decreases and bottoms out after 6 months, the effect of which is statistically significant up to 8 months, which implies a feedback effect between foreign capital flows and output of the minerals industry. Foreign direct investment is, thus, important for economic activity, hence policymakers should monitor the developments in cross border capital flows to support economic activity and the minerals industry. |
| Keywords: | Foreign direct investment, Minerals industry, Economic cycles |
| JEL: | C00 E50 G10 L72 |
| Date: | 2025–01–04 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:124274 |
| By: | Tanguy Bonnet (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | The aim of this paper is to investigate the links between energy transition critical minerals -which are crucial to the deployment of low-carbon technologies -and foreign direct investments. To this end, we consider the production of 8 energy transition critical minerals over the 1997-2020 period as an explanatory variable for FDI inflows, by using an original, complete, and precise database. Implementing a battery of panel data estimations to ensure the robustness of our results, we find that there is no FDI-resource curse for the energy transition critical minerals production. Unlike oil, energy transition critical minerals do generally attract foreign capital inflows, the positive attraction effect on resource seeker FDI likely dominates the negative eviction effect on nonresource seeker FDI; the minerals with the strongest FDI attraction effect being cobalt, lithium, and rare earth elements. These results confirm the important economic and strategic motivations of investing countries and companies, but also represent risks and opportunities for the host mining countries. |
| Keywords: | Energy transition critical minerals ; Foreign direct investments ; Resource curse |
| Date: | 2025–03–21 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05000376 |
| By: | Gurpriya Sadana (Indian Institute of Foreign Trade (IIFT), Delhi, India); Jaydeep Mukherjee (Department of Commerce, Ministry of Commerce and Industry) |
| Abstract: | The study examines the relationship between exports and FDI inflows at the subnational /state level for the Indian economy from 2011-2020. The study employs panel random effect regression and found that GSDP, infrastructure index, financial deve lopment index and state policy variable representing distinct export promotion policies pursued by the states are significant determinants of exports at the state level. However, a substitutable relationship has been established between FDI inflows and exports at the state level, suggesting that FDI is market-seeking and does not contribute to improved export performance by the states. |
| Keywords: | Subnational Exports, Spatial factors, Panel Data, India |
| JEL: | F10 O53 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:ift:wpaper:2470 |
| By: | Bruno Albuquerque; Mr. Eugenio M Cerutti; Yosuke Kido; Mr. Richard Varghese |
| Abstract: | This paper shows that not all housing price cycles are alike. The nature of the housing expansion phase—especially whether a housing price boom characterized by rapid and persistent house price growth is present—plays a key role in shaping the severity of the subsequent contraction, and the net macroeconomic impact over the full cycle. Analyzing 180 housing expansions across 68 countries, we classify 49 percent as housing booms, characterized by rapid and persistent real house price increases. We find that economic downturns are significantly deeper and longer when housing contractions are preceded by a housing boom. The housing contraction is more severe the more intensive the preceding housing boom, and when accompanied by a credit boom. Overall, while housing booms spur stronger economic growth during the expansion phase, their sharp reversals lead to severe housing contractions, resulting in significant net negative effects on the real economy. |
| Keywords: | Housing booms; Housing busts; Credit booms; Macroprudential policies |
| Date: | 2025–02–28 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/050 |
| By: | Robert C. M. Beyer; Claire Li; Mr. Sebastian Weber |
| Abstract: | EU enlargement has stalled since the last member joined over ten years ago, marking the longest period without expansion since 1973. This elapsed time contrasts with the potential income gains membership promises. Drawing on the biggest EU enlargement in 2004 and employing a synthetic difference-in-difference estimator on regional data, we estimate that EU membership has increased per capita incomes by more than 30 percent. Capital accumulation and higher productivity contributed broadly equally, while employment effects were small. Gains were initially driven by the industrial sector and later by services. Despite substantial regional heterogeneity in gains—larger for those with better financial access and stronger integration in value chains prior to accession—all regions that joined the EU benefited. Moreover, existing members benefited too, with average income per capita around 10 percent higher. The estimated gains suggest that deep integration carries significant additional economic benefits beyond simple trade unions, providing valuable lessons for future EU enlargement and regional integration efforts elsewhere. |
| Keywords: | European Union; Deep Integration; 2004 EU Enlargement; GDP Growth; NUTS2 Regions |
| Date: | 2025–02–21 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/047 |
| By: | Marc Gronwald; Sania Wadud |
| Abstract: | This paper explores the relationship between green bond markets and both green and conventional financial markets, while also evaluating their effectiveness as a climate finance instrument. Using the Thick Pen Measure of Association — a visually interpretable tool for analysing co-movement across different time scales — we identify several key findings. First, the relationship between green bonds and other markets evolves over time, influenced by major events such as COVID-19, the Ukraine war, and earlier structural changes. Second, green bonds show the strongest co-movement with benchmark bond markets, indicating they are driven by similar fundamental factors. In contrast, their connection to stock markets is weaker and, in some cases, declining, reinforcing their potential as a diversification tool. However, short-term movements in the green bond market remain closely linked to the long-term stock market environment, particularly during periods of market stress. |
| Keywords: | green bonds, financial markets, co-movement, Thick Pen Measure of Association, data science |
| JEL: | C14 C32 C46 G12 Q56 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_11773 |