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on Financial Development and Growth |
| By: | Carlos Madeira |
| Abstract: | Using country-industry panel data between 1980 until 2019, I estimate the causal effects of financial crises, with total impact given by the sum of a direct effect on all industries and an external finance dependence channel. Currency crises have the worst impact of all types of crises across all countries. Financial crises of all types are substantially worse for the Middle East and North Africa (MENA) economies. For MENA, there is a manufacturing growth reduction of 2.8%, 6% and 1.2% during banking, currency and sovereign debt crises. There is substantial heterogeneity across the MENA, with Morocco, Iraq and Israel experiencing a much stronger impact from all types of financial crises. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:chb:bcchwp:1045 |
| By: | Timothy J. Kehoe; Xing Xu |
| Abstract: | In the late 1980s, Mexico opened itself to international trade and foreign investment, followed in the early 1990s by China. China and Mexico are still the two countries characterized as middle-income by the World Bank with the highest levels of merchandise exports. Although their measures of openness have been comparable, these two countries have had sharply different economic performances: China has achieved spectacular growth, whereas Mexico’s growth has been disappointingly modest. In this article, we extend the analysis of Kehoe and Ruhl (2010) to account for the differences in these experiences. We show that China opened its economy while it was still achieving rapid growth from shifting employment out of agriculture and into manufacturing while Mexico opened long after its comparable phase of structural transformation. China is only now catching up with Mexico in terms of GDP per working-age person, and it still lags behind in terms of the fraction of its population engaged in agriculture. Furthermore, we argue that China has been able to move up a ladder of quality and technological sophistication in the composition of its exports and production, while Mexico seems to be stuck exporting a fixed set of products to its North American neighbors. |
| JEL: | F43 O32 O47 O57 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34181 |
| By: | Naveen Srinivasan (Madras School of Economics, Chennai, Tamil Nadu, India, 600025); Poorna Narayanan (Madras School of Economics, Chennai, Tamil Nadu, India, 600025); Megana Prabha (London School of Economics and Political Science, Houghton Street, London, WC2A 2AE, United Kingdom); Hariharasudhan Selvaraj ((corresponding author) Madras School of Economics, Chennai, Tamil Nadu, India, 600025) |
| Abstract: | We introduce credit constraints into a standard model of endogenous growth. In the presence of credit constraints, firms in poor countries face higher borrowing costs which in turn negatively affects capital accumulation and labor productivity in the final-goods producing sector. Furthermore, lower capital intensity of production makes R&D activity less profitable. As a result, both demand for skilled labor and return to skill are lower in poor countries. Domestic financial frictions may therefore be the key to understanding the persistent wage differentials in favor of rich countries and international migration patterns we observe. |
| Keywords: | Skilled Wages; Migration; Credit Constraints; R&D; Endogenous Growth |
| JEL: | F2 D24 D42 J23 J24 J62 O40 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:mad:wpaper:2025-289 |
| By: | C.O. Olaniyi (University of South Africa); N.M. Odhiambo (University of South Africa) |
| Abstract: | Purpose This study examines the moderating role of institutional quality and its threshold in the African financial development-economic complexity nexus. This objective follows the argument that institutional quality influences the financial system's efficiency in allocating resources to innovative initiatives and activities that increase productivity knowledge and technical capabilities in an economy's production system to produce complex products and exports. Design/methodology/approach To achieve these objectives, this study adopts novel and robust approaches such as the system generalized method of moments (GMM), the Driscoll-Kraay nonparametric covariance matrix estimator (DK), the method of moments quantile regression, and a dynamic panel threshold to analyze the annual dataset of 29 African countries covering 1995-2020. Findings This study establishes robust and persistent evidence of interdependence, intertwining, and heterogeneity among African countries. In addition, the study affirms long-run relationships among the variables through various estimators. Both mean-based (GMM and DK) and quantile regressions consistently demonstrate that financial development and institutional quality separately enhance Africa's economic complexity across quantiles. In contrast, institutional quality drains financial development's contribution to economic complexity when the coefficients are significant. The moment-quantile regression reveals that institutional quality complements financial development to support economic complexity from the 10th to 30th quantiles, but the coefficients are insignificant. The threshold estimation confirms nonlinearity and the institutional quality threshold estimate is 5.73 on the ordinal scale of 10. On average, only six African countries exceed the threshold, while others operate below the benchmark. Research limitations/implications Based on the findings, African financial systems operate within weak institutional frameworks. These phenomena allow rent-seeking, opportunism, corruption, and sharp practices, which divert financial resources from innovative activities and investments in research and development, human capital development, technology, high-tech infrastructure, and entrepreneurial innovation. As a result, Africa's institutional quality impairs the financial sector's ability to spur economic complexity upgrades. African economies need better institutional architectures to maximize financial development's benefits of upgrading economic complexity. The policy implications and recommendations of this study are more relevant to African settings and situations. Thus, other scholars are encouraged to conduct similar research for other continents to enrich the study’s outcomes. Originality/value The following are the highlights of this study's novelties: 1.) To the best of the authors' knowledge, this is the first study to examine the moderating role of institutional quality in the financial development-economic complexity nexus in Africa using estimators that account for cross-sectional dependence, distributional effects, and heterogeneous effects (the Driscoll-Kraay nonparametric covariance matrix estimator (DK) and the method of moment quantile regression). 2.) Unlike earlier research, this study establishes a threshold of institutional quality in the financial development-economic complexity nexus. We propose that the institutional structures that govern Africa's financial systems be examined and trimmed. This move helps to phase out the inherent inadequacies that drain financial development's contributions to economic complexity. |
| Date: | 2024–12–30 |
| URL: | https://d.repec.org/n?u=RePEc:afa:wpaper:wp042024 |
| By: | Maximiliano San Millán |
| Abstract: | We examine the cross-border effects of bank capital requirements using a two-country DSGE model with financial frictions, calibrated to match Euro Area banking flows. Regulation follows a host country principle, applying uniformly to all bank exposures within a country, regardless of the banks' nationality. We find that increasing capital requirements in one country leads to a short run credit contraction in interconnected countries. However, long run credit spillovers are negligible. Instead, we find positive long run welfare spillovers, primarily due to higher bank dividend payouts to foreign bank owners, rather than increased financial stability in the foreign country. |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:chb:bcchwp:1046 |
| By: | R.I. Thamae (University of South Africa); N.M. Odhiambo (University of South Africa) |
| Abstract: | This study aimed to empirically determine the symmetric and asymmetric causal relationship between banking regulation and bank credit delivery using a context of 23 sub-Saharan African countries from 1995 to 2017. The estimated symmetric and asymmetric error correction-based multivariate panel Granger-causality models allowed for both long-run and short-run causal relationships. The results generally supported the existence of long-run symmetric and asymmetric causality between banking regulatory measures, bank credit delivery and two intermittent variables, namely, economic growth and inflation. In the short run, bidirectional symmetric causality existed between banking entry barriers and bank credit delivery, as well as a one-way symmetric causal flow running from bank credit delivery to banking capital regulations. Moreover, positive shocks to bank credit delivery Granger caused negative shocks to banking entry barriers, activity restrictions or capital regulations, while negative shocks to mixing of banking and commerce restrictions Granger caused positive or negative shocks to bank credit delivery. The findings highlight that policymakers should take into consideration not only the symmetric but also the asymmetric causal effects of reforms aimed at enhancing banking regulation and such reforms should be well-targeted and well-designed for them to stimulate bank credit delivery. |
| Date: | 2024–12–30 |
| URL: | https://d.repec.org/n?u=RePEc:afa:wpaper:wp052024 |
| By: | Valentin Haddad; Tyler Muir |
| Abstract: | Intermediary asset pricing posits that financial institutions are important players in financial markets, and that their decisions shape asset prices beyond simply reflecting the preferences of the average household in the economy. We explain how the intermediary-asset pricing approach helps make sense of empirical patterns in the data: the excess volatility of asset prices, differences in price movements across asset classes, the cross section of expected returns within asset classes, and specific arbitrages and price dislocations. We also review how this view of price fluctuations has important implications for macroeconomic dynamics, international economics, and policy. In particular, the role of financial regulation and monetary policy in alleviating constraints or removing risk from intermediary balance sheets during periods of stress is central in this approach. We highlight both existing progress and gaps for future research. |
| JEL: | E44 G0 G01 G1 G2 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34146 |
| By: | Edward N. Wolff |
| Abstract: | There has been a seismic shift in age-wealth profiles in the U.S. over years 1983 to 2022. The most notable is the sharp rise in the relative household wealth of age group 75 and over. Correspondingly, the relative wealth holdings of all other age groups dropped over these years. Using the Survey of Consumer Finances, the paper focuses on the youngest age group, 35 and under, and the oldest age group, 75 and over, and analyzes the factors behind these relative shifts in wealth. I find that the three principal factors are the homeownership rate, total stocks directly and indirectly owned, and home mortgage debt. The homeownership rate is the same in the two years for the youngest group but falls relative to the overall rate, whereas it shoots up for the oldest group both in actual level and relative to the overall average. The value of stock holdings rises for both age groups but vastly more for the oldest households compared to the youngest ones and accounts for a substantial portion of the elderly’s relative wealth gains. Mortgage debt rises in dollar terms for both groups but considerably more in relative terms for the youngest group. |
| JEL: | D31 J1 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34131 |
| By: | Naoto Tanemoto (Graduate School of Economics, Kobe University); Hinami Takai (Graduate School of Economics, Kobe University); Tomomi Miyazaki (Graduate School of Economics, Kobe University) |
| Abstract: | This study examines the nonlinear effects of public capital in Japan by using a panel threshold regression method. First, our empirical results confirm the threshold effects of public capital productivity in Japan. Second, we demonstrate that rural regions gradually become low productivity regions over time. These results imply that the consideration of threshold effects is essential for understanding nonlinearities in the level of public capital and its economic effects in Japan. JEL Classification: E24, E62, H30 |
| Keywords: | Public capital, nonlinearity, panel threshold regression |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:koe:wpaper:2516 |
| By: | Ngoc-Sang Pham; Alexis Akira Toda |
| Abstract: | Tirole (1985) studied an overlapping generations model with capital accumulation and showed that the emergence of asset bubbles solves the capital over-accumulation problem. His Proposition 1(c) claims that if the dividend growth rate is above the bubbleless interest rate (the steady-state interest rate in the Diamond economy without bubbles) but below the population growth rate, then bubbles are necessary in the sense that there exists no bubbleless equilibrium but there exists a unique bubbly equilibrium. We provide a counterexample to this claim based on an analytical example but prove the claim under the additional assumptions that initial capital is sufficiently large and dividends are sufficiently small. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.12477 |
| By: | Samuel Fiifi Eshun (Institute of Economic Studies, Charles University, Prague, Czech Republic); Evzen Kocenda (Institute of Economic Studies, Charles University, Prague, Czech Republic; Environment Centre, Charles University, Prague, Czech Republic; CESifo Munich; IOS Regensburg) |
| Abstract: | We present a comprehensive meta-analysis of the determinants of financial inclusion, synthesizing 3, 817 estimates from 102 studies published between 2013 and 2024. To reconcile divergent findings, we convert all results to a common unbiased metric-the partial correlation coefficient corrected via the UWLS+3 approach-and apply recent advances in meta-analysis methodology. The evidence shows that while reported effects are small and positive, they are systematically inflated by publication bias; once corrected, the underlying impact is more modest but remains economically meaningful. Among determinants, income-related factors play only a minor role, whereas technology, infrastructure, and persistence over time have far greater influence. Regional variation is substantial: Sub-Saharan Africa and MENA benefit more consistently from inclusion drivers than Europe or Asia. The results temper overly optimistic interpretations of individual studies and provide robust benchmarks for policymakers seeking to design effective and realistic strategies for advancing inclusive finance worldwide. |
| Keywords: | Financial inclusion, banks, meta-analysis, model uncertainty, publication bias, Bayesian model averaging |
| JEL: | C83 G21 O16 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2025_14 |
| By: | Dominique Torre (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis (1965 - 2019) - CNRS - Centre National de la Recherche Scientifique - UniCA - Université Côte d'Azur); Qing Xu (ICL, Junia, Université Catholique de Lille) |
| Abstract: | We examine the potential of upcoming Central Bank Digital Currencies (CBDCs) to be used as a means of transferring remittances. In a simple theoretical model, CBDCs compete with traditional channels provided by specialized intermediaries and with digital transfer options already offered by fintech companies. Their success depends on factors such as anonymity, potential conversion into cash, and the network effects generated by CBDC transactions among recipients' families. |
| Abstract: | Nous examinons le potentiel des futures monnaies numériques de banque centrale (CBDC) en tant que moyen de transfert de fonds. Dans un modèle théorique simple, les CBDC sont en concurrence avec les canaux traditionnels fournis par des intermédiaires spécialisés et avec les options de transfert numérique déjà proposées par les entreprises de technologie financière. Leur succès dépend de facteurs tels que l'anonymat, la possibilité de conversion en espèces et les effets de réseau générés par les transactions en CBDC entre les familles des bénéficiaires. |
| Keywords: | fintech, cross-border payments, E58 Central Bank Digital Currencies, D85, JEL Classification: E42 D85 E58 Central Bank Digital Currencies cross-border payments fintech, Migrants, Fintech, Cross-boarder payments, Central Bank Digital Currencies, JEL Classification: E42 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:halshs-05208283 |
| By: | Hanfeng Chen; Maria Elena Filippin |
| Abstract: | We study the implications of a central bank digital currency (CBDC) for the transmission of household preference shocks and for welfare in a New Keynesian framework where the CBDC competes with bank deposits for household resources and banks have market power. We show that an increase in the benefit of CBDC has a mildly expansionary effect, weakening bank market power and significantly reducing the deposit spread. As households economize on liquid asset holdings, they reduce both CBDC and deposit balances. However, the degree of bank disintermediation is low, as deposit outflows remain modest. We then examine the welfare implications of CBDC rate setting and find that, compared to a non-interest-bearing CBDC, the gains with standard coefficients for a CBDC interest rate Taylor rule are modest, but they become considerable when the coefficients are optimized. Welfare gains are higher when the CBDC provides a higher benefit. |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2507.15048 |
| By: | Capelle, Damien; Pellegrino, Bruno |
| Abstract: | We use a dynamic spatial general equilibrium model of international investment and production to in vestigate the real implications of the last five decades of financial globalization. We introduce a wedge accounting framework to estimate country- and time-varying measures of outward and inward Revealed Capital Account Openness (RKO). We show how to identify these wedges for a large panel of countries using limited publicly available data on national accounts and external asset and liability po- sitions since the 1970s. Our analysis reveals striking cross-country differences in the pace and direction of financial account opening: wealthier countries have become relatively more open to foreign capital inflows, while poorer countries have become relatively more open to capital outflows, a phenomenon we call "Unbalanced Financial Globalization." Counterfactual simulations show that this unbalanced financial globalization has worsened capital allocation, resulting in a 5.9% decrease in world GDP, a 3.4% rise in cross-country income inequality, lower wages in poorer countries, and a decline in rates of return on capital in richer countries. In contrast, if financial account opening had been uniform, the improved allocation of capital would have reduced income inequality, and increased global GDP. These findings underscore the crucial role of spatial heterogeneity in shaping the real impact of international capital markets integration. |
| Keywords: | capital flows, capital allocation, globalization, international finance, open economy |
| JEL: | F2 F3 F4 F6 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:324648 |
| By: | Marco Reuter; Mr. Itai Agur; Alexander Copestake; Maria Soledad Martinez Peria; Mr. Ken Teoh |
| Abstract: | Cross-border payments are changing: existing intermediaries are upgrading their networks and new platforms based on novel digital forms of money are being explored, even as geoeconomic fragmentation is introducing new frictions. We develop a stylized model to assess the potential implications for the level and volatility of capital flows and exchange rates. On levels, we find that lower frictions in cross-border payments reduce UIP deviations and increase capital flows. On volatility, we find that the impact of lower frictions depends on the type of shock and the degree to which frictions decline. For real shocks, lower frictions increase capital flow volatility and reduce exchange rate volatility. For financial shocks, lower frictions increase exchange rate volatility while the impact on capital flow volatility is ambiguous. Specifically, when frictions decline by a small amount, capital flow volatility increases, while the opposite holds when the reduction in frictions is large. An increase in frictions reverses these results. |
| Keywords: | Exchange Rates; Capital Flows; Interest Parity; Payment Frictions |
| Date: | 2025–08–29 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/171 |
| By: | Philippe Bacchetta; J. Scott Davis; Eric Van Wincoop |
| Abstract: | Global non-U.S. banks have significant dollar exposure both on and off their balance sheet. We develop a model to analyze their adjustment to dollar funding shocks, whether from reduced direct lending or external dollar shortages. The model provides insight into banks’ responses through borrowing, lending and FX swap positions, as well as the impact on their net worth, their probability of default and CIP deviations. Implications of the model are confronted with data on the response of non-U.S. global banks to major dollar funding shocks. We examine the benefits from buffering these shocks through central bank dollar swap lines or local currency lending by the central bank. |
| Keywords: | GSIB Banks; U.S. Dollar Liquidity; CIP Deviations; Liquidity Swap Lines |
| JEL: | F30 F40 |
| Date: | 2025–08–12 |
| URL: | https://d.repec.org/n?u=RePEc:fip:feddwp:101523 |
| By: | Friederike Niepmann; Leslie Sheng Shen |
| Abstract: | How do banks respond to geopolitical risk, and is this response distinct from other macroeconomic risks? Using U.S. supervisory data and new geopolitical risk indices, we show that banks reduce cross-border lending to countries with elevated geopolitical risk but continue lending to those markets through foreign affiliates—unlike their response to other macro risks. Furthermore, banks reduce domestic lending when geopolitical risk rises abroad, especially when they operate foreign affiliates. A simple banking model in which geopolitical shocks feature expropriation risk can explain these findings: Foreign funding through affiliates limits downside losses, making affiliate divestment less attractive and amplifying domestic spillovers. |
| Keywords: | geopolitical risk; bank lending; credit risk; international spillovers |
| JEL: | F34 F36 G21 |
| Date: | 2025–08–01 |
| URL: | https://d.repec.org/n?u=RePEc:fip:fedbwp:101470 |
| By: | Oumayma El Rhrib (UIT - Université Ibn Tofaïl); Laila Bennis (UIT - Université Ibn Tofaïl) |
| Abstract: | Abstract: The term "geofinance" was first introduced by Charles Goldfinger in his book Geofinance: Understanding Financial Transformation in 1986, marking a turning point in the understanding of the interplay between finance and geopolitics. Geofinance, as a concept, has gradually taken shape in academic work, drawing particular attention for the way it links geopolitical forces with the behavior of global financial markets. In today's deeply interconnected economy, events such as armed conflicts, economic sanctions, or prolonged political instability can unsettle investors and shift market dynamics in ways that are both immediate and far-reaching. For this review, we worked within the PRISMA 2020 framework, narrowing the scope to 45 studies, journal articles, book chapters, and conference proceedings, after the final screening stage. These works were examined not only for the theories they propose, but also for the empirical methods they rely on. The analysis brings forward recurring patterns, the most notable advances, and the blind spots that remain in the literature, offering several directions that future studies could take to close those gaps. It particularly emphasizes the diversity of theoretical perspectives and empirical strategies applied to assess the financial repercussions of geopolitical tensions. By drawing on a broad range of interdisciplinary studies, this review contributes to a deeper understanding of the mechanisms through which geopolitical shocks reverberate across financialsystems. The findings underscore the growing importance of geofinance as a theoretical framework and analytical tool for understanding the impact of geopolitical dynamics on financial markets and highlight the need for further research to better grasp this complex relationship. |
| Keywords: | Financial risk, Financial markets, Geopolitical events, Global finance, Geofinance |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05212199 |
| By: | Shalva Mkhatrishvili |
| Abstract: | The key function of banks in the real world is endogenously creating (inside) money. But they do so facing solvency, liquidity and maturity risks and being subject to regulatory and demand constraints. These five aspects, representing the eventual breaks on banks’ money-creation abilities, are tightly and nonlinearly interlinked. Yet, there is no tractable quantitative macro framework that models endogenous money creation while simultaneously addressing these interlinkages. In this paper we develop a tractable macro-banking model trying to fill this gap, emphasizing two key frictions: the capital adequacy constraint (generating a credit risk premium) and the central bank’s collateral base constraint (generating a liquidity risk premium). The model simulations produce conclusions, about both normal times as well as stress episodes, many of which were frequently overlooked. For instance, it shows how – within capital requirements – setting lower risk weights on secured loans may lead to an expansion of unsecured loans. It also reveals subtle interactions between capital and liquidity regulations. The model also creates a certain bridge between a money-centered view of the price level and the fiscal theory of the price level. |
| Keywords: | Endogenous Money Creation; Monetary Policy; Macroprudential Policy; Fiscal Theory of the Price Level; Macro-Banking Modeling |
| Date: | 2025–08–22 |
| URL: | https://d.repec.org/n?u=RePEc:imf:imfwpa:2025/166 |
| By: | Patrick Gruning (Latvijas Banka) |
| Abstract: | During the recent monetary policy tightening cycle, the pass-through of monetary policy to interest rates offered by commercial banks and the size of bank profits have attracted substantial attention. In this study, I explore the economic effects of reducing the adjustment speed of monetary policy changes to deposit interest rates, using a suitable New-Keynesian dynamic stochastic general equilibrium model. A lower deposit interest rate adjustment speed increases macroeconomic volatility but decreases the volatility of the credit spread (except in the case of a very low adjustment speed). Bank net interest income and aggregate consumption typically increase relative to a model where the deposit interest rate perfectly tracks the monetary policy rate, while aggregate output and investment dynamics deteriorate. Introducing a tax on the interest income earned by setting deposit interest rates below the monetary policy rate leads to amplified short- and medium-run macroeconomic costs. However, the tax improves long-run economic dynamics. |
| Keywords: | Monetary policy, Financial intermediaries, Deposit interest rates, New Keynesian DSGE model, Excess bank interest income tax |
| JEL: | E31 E32 E44 E52 H25 |
| Date: | 2025–08–18 |
| URL: | https://d.repec.org/n?u=RePEc:ltv:wpaper:202505 |
| By: | Kristian Blickle; Jian Li; Xu Lu; Yiming Ma |
| Abstract: | We document that deposit flightiness varies significantly over time, peaking after Covid-19. Elevated deposit flightiness coincides with QE and low interest rates. We rationalize these trends based on heterogeneity in investors’ convenience value. Investors in the banking system value the convenience benefits of deposits more than outside investors. Following deposit inflows, e.g., due to QE's reserve expansions, the marginal depositor in the banking system becomes less convenience seeking and the risk of panic runs increases. As a result, policy rate hikes are more destabilizing when preceded by QE. Our findings reveal a novel linkage between conventional and unconventional monetary policy. |
| JEL: | E5 E50 G2 G21 G23 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34128 |
| By: | Olivia Bordeu; Gustavo González; Marcos Sorá |
| Abstract: | Using detailed loan-level data from Chile, we document significant geographic differences in interest rates for firm loans. Firms in cities with high borrowing costs pay around 280 basis points more than firms in low-cost cities. While these estimates account for differences in firm and loan characteristics across cities, we find evidence that they are related to the level of concentration in the local loan market. We examine the pass-through of monetary policy to lending rates and find that banks with higher local market shares exhibit stronger pass-through, aligning with oligopolistic models of branch competition. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:chb:bcchwp:1042 |
| By: | Giuliana, Raffaele (ESRB); Reddan, Paul (European Commission) |
| Abstract: | We use credit registry data on lending to businesses in Ireland, a developed, small open economy, which has a significant share of new credit to firms provided by non-bank lenders. We assess whether lending from non-banks reacts more sensitively in comparison to banks to a tightening in financial conditions. We use a fixed effects approach to isolate credit supply effects and show that non-banks contract lending to a greater degree than banks in response to tightening financial conditions. We also highlight the critical importance of looking beyond the binary classification of banks versus non-banks when conducting analysis on how the increased role of non-banks in direct lending may affect financial stability. We show that asset finance providers and general lenders do not contract lending in response to a tightening in financial conditions, and instead increase credit supply in comparison to the banking sector. In contrast, specialist property lenders react negatively and strongly, contracting lending significantly in comparison to banks. |
| Keywords: | Non-Bank lending, financial conditions, credit supply, financial stability, non-bank financial Institutions, private credit, alternative lenders. |
| JEL: | G23 E44 E51 G21 E58 G01 E44 L20 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:wpaper:5/rt/25 |
| By: | Billington, Stephen D. (Ulster University Business School, Ulster University); Colvin, Christopher L. (Queen’s Business School, Queen’s University Belfast); Coyle, Christopher (Queen’s Business School, Queen’s University Belfast) |
| Abstract: | We examine how the design of the patent system shapes firms’ access to finance. We exploit a UK reform that introduced substantive examination into the patent application process, improving the quality of information available to investors about the value of firms’ innovation. Using a newly compiled dataset of officially listed corporations, we find that firms with examined patents increased their borrowing, reflecting improved access to capital markets, which translated into firm growth. Our results highlight how patent examination can function as a screening mechanism that reduces information asymmetry, strengthens the signalling value of patents, and mitigates financial barriers to innovation. |
| Keywords: | firm finance, debt, innovation, patents, patent examination, signalling. JEL Classification: G32, N23, N43, O16, O31, O34 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:cge:wacage:767 |
| By: | Pulak Ghosh; Boris Vallee; Yao Zeng |
| Abstract: | Borrowers’ use of cashless payments improves their access to capital from FinTech lenders and predicts a lower probability of default. These relationships are stronger for cashless technologies providing more precise information, and for outflows. Cashless payment usage complements other signals of borrower quality. We rationalize these empirical findings using a framework in which borrowers signal their lower likelihood of diverting cash flows through payment technology choice, and screening accuracy is further strengthened by informational complementarities. The informational synergy we uncover provides a rationale for the joint rise of cashless payments and FinTech lending, as well as for open banking. |
| JEL: | E42 G21 G23 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34148 |
| By: | Raphaël Chiappini (University of Bordeaux); Enea Gerard (University of Bordeaux) |
| Abstract: | This paper investigates the impact of environmental regulations on inward foreign direct investment (FDI) using a novel index that distinguishes between the implementation and enforcement of environmental policy across 111 countries from 2001 to 2018. Leveraging bilateral FDI data and a structural gravity model, we find robust evidence of a Pollution Haven Effect: stricter environmental regulations in host countries are associated with lower inward FDI. The effect is more pronounced in emerging markets and in environments with higher corruption. Importantly, we show that FDI responds more strongly to policy implementation, capturing formal regulatory commitment, than to enforcement, measured as deviations between predicted and actual emissions. In addition, bilateral FDI patterns are shaped by the environmental stringency gap between source and host countries, consistent with regulatory arbitrage behavior. |
| Keywords: | Environmental regulation, foreign direct investment, Pollution Haven Hypothesis |
| JEL: | F Q |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:inf:wpaper:2025.09 |
| By: | Saon Ray (Indian Council for Research on International Economic Relations (ICRIER)); Vasundhara Thakur |
| Abstract: | The urgent need to address climate change has placed environmental degradation and sustainable development at the centre of policy discussions. This highlights the importance of examining how the financial system directs funds toward green investments or emission-intensive industries. Expanding financial inclusion integrates more individuals into the formal financial system, influencing capital allocation. India has introduced several initiatives in recent years to enhance financial inclusion. In this context, this study explores the impact of financial inclusion on carbon emissions in India from 1990 to 2018. It also examines the interplay of financial inclusion and financial development on carbon emissions in India. The study uses the ARDL bounds testing approach to find a long-run relationship between financial inclusion and carbon emissions. However, the interaction between financial inclusion and financial development does not significantly impact emissions in the long run. These findings contribute to understanding the role of financial inclusion in shaping India's environmental trajectory. |
| Keywords: | financial inclusion, carbon emissions, financial development, banking, green finance, icrier |
| Date: | 2025–03 |
| URL: | https://d.repec.org/n?u=RePEc:bdc:wpaper:427 |