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on Financial Development and Growth |
| By: | Maria Teresa Balaguer-Coll (Department of Finance and Accounting, Universitat Jaume I, Castellón, Spain); Lorenzo Caldirola (Department of Statistics and Operational Research, Universidad de Valencia, Spain); David Conesa (Department of Statistics and Operational Research, Universidad de Valencia, Spain); Rodrigo Cuenca De Armas (Department of Economics, Universitat Jaume I, Castellón, Spain); Emili Tortosa-Ausina (IVIE, Valencia and IIDL and Department of Economics, Universitat Jaume I, Castellón, Spain) |
| Abstract: | The article discusses the impact of physical bank branches on economic growth and the importance of considering this impact in a global context. Despite the rise of internet banking, physical access to essential goods and services remains crucial. Studies have shown a link between financial development, physical bank presence, and economic growth, but these studies have mostly been limited to single-country analyses, or lower territorial jurisdictions. To extend this research, we consider a large sample of countries and employ a Bayesian quantile regression approach to assess the varying impacts of bank branching on development. This method allows for an evaluation of whether the effects differ for poorer and richer regions. Results show that the stage of development is critical when assessing the impact of bank branch networks on development, and that the link is particularly weak in some geographical areas. |
| Keywords: | Bank branches; Financial development; Economic growth; Quantile regression |
| JEL: | G21 O16 O47 C23 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:jau:wpaper:2025/08 |
| By: | Gasindikira, Josue |
| Abstract: | This study highlights, through the panel data approach, some economic growth’s determinants for Economic and Monetary Community of Central Africa (CEMAC) and economic Community of the Great Lakes Countries (CEPGL) countries from 2000 to 2018. The methodology relied on the within estimator and the Generalized Least Squares (GLS) estimator. The results indicate that Official Development Assistance (ODA) contributes significantly to economic growth within these two zones. However, the inflation rate is harmful for the CEPGL only. This situation would be caused by the fact that CEPGL is not yet a monetary zone. For CEMAC, capital has a significantly positive effect while the impact of trade openness is negative on the economic growth of these countries. Thus, relevant policies must be framed to improve economic growth levels within these zones, especially economic integration and good governance’s policies. |
| Keywords: | Economic growth, Economic integration, Panel, Within, GLS. |
| JEL: | C23 F15 O47 O55 |
| Date: | 2024–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126317 |
| By: | nisar, ghania |
| Abstract: | This study investigates the relationship between domestic banking development and Foreign Direct Investment (FDI) in nine Shanghai Cooperation Organization (SCO) economies, including Pakistan, India, Iran, China, Russia, Tajikistan, Kyrgyzstan, Kazakhstan, and Uzbekistan, from 2000 to 2023. Using a panel econometric framework that combines the Pooled Mean Group (PMG) estimator with Pesaran’s Common Correlated Effects (CCE) approach, the results show a positive long-run association between banking sector development and FDI. Granger causality analysis provides evidence of a unidirectional relationship, indicating that the development of the banking sector statistically precedes and is strongly associated with foreign investment. The positive long-run association highlights the crucial role of robust banking systems as domestic anchors for investment and as key components of regional economic resilience. The results yield two principal policy implications. First, strengthening domestic banking institutions is an important national strategy for enhancing attractiveness to foreign capital. Second, coordinated efforts among SCO countries are necessary to manage shared economic vulnerabilities and to improve the bloc’s collective investment appeal. |
| Keywords: | Banking Sector Development, Bank Credit, FDI, Emerging Economies, SCO, Panel ARDL, Common Correlated Effects |
| JEL: | F36 F38 G2 O16 O18 O19 |
| Date: | 2025–09–17 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126205 |
| By: | Shu Cai (Jinan University); Albert Park (Asian Development Bank); Sangui Wang (Renmin University of China) |
| Abstract: | This study investigates the impacts of a government-led microcredit program in the People’s Republic of China (PRC) which was implemented at scale in poor rural areas, using a randomized controlled trial (RCT). In contrast to recent RCT-based studies that found no evidence of significant increases in income from microcredit interventions, we find that the Chinese program significantly raises household income and reduces poverty. We explore possible explanations for why the estimated impacts may be greater in the PRC, including larger loan size, lump sum repayments, lower interest rates, less access to formal credit before the program, and greater returns from credit constrained off-farm employment opportunities. |
| Keywords: | microfinance;program evaluations;randomized controlled trial |
| JEL: | D12 D22 G21 I32 O16 |
| Date: | 2025–10–20 |
| URL: | https://d.repec.org/n?u=RePEc:ris:adbewp:021688 |
| By: | Filip Zahradka (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Adam Gersl (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | This paper investigates the effectiveness of macroprudential policy across different phases of macro-financial cycles. Utilizing a panel threshold vector autoregression (PT-VAR) model, the study evaluates the asymmetric impacts of capital-based and borrower-based regulatory tools under varying conditions. The empirical analysis covers 43 countries from 2004 to 2023 and incorporates key macro-financial indicators such as real GDP, policy interest rates, credit-to-GDP ratio, house prices, inflation, and exchange rates. The results can be summarized in three key findings. First, the effects of macroprudential tightening differ substantially between below- and above-threshold regimes, underscoring the importance of the phase of the macro-financial cycles. Second, capital-based measures are particularly effective during below-threshold phases, curbing credit growth, house prices, and inflation, though they are associated with a relatively significant decline in real GDP growth. Third, borrower-based measures are most effective during above-threshold phases of the business cycle, where they help to contain house prices and inflation pressures, while having only muted effects on real GDP growth. These findings emphasize the critical role of timing and instrument choice in macroprudential policy design and contribute to the growing literature by providing robust evidence on the cyclical nature of policy effectiveness, offering important insights for regulatory strategy. |
| Keywords: | Macroprudential policy, Macro-financial cycles, Panel threshold VAR, Systemic risk |
| JEL: | C33 E32 E44 E58 G21 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:fau:wpaper:wp2025_20 |
| By: | Liu, Zihao (Tilburg University, School of Economics and Management) |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:tiu:tiutis:440468a5-5c38-4aab-ba29-b83a255fac6a |
| By: | Araujo, Luis; Minetti, Raoul; Moherdaui, Gustavo; Tomarchio, Alessandro |
| Abstract: | Financial specialization shapes the impact of financial institutions on the real economy. We study the determinants and real sector consequences of banks’ specialization in an economy where banks’ access to liquidity depends on investors’ information on the quality of banks’ assets. When choosing their sectoral specialization, banks trade off the benefits of sectoral expertise on borrowers’ investments with the incentive to maintain opacity on shocks to loan portfolios. The model generates a distribution of banks by size and specialization in which small banks specialize more, and lend to more informationally opaque firms, than larger banks. We show that regulations that promote financial disclosure enhance banks’ specialization, increasing welfare, while bank size regulations can distort banks’ specialization downward. The predictions of the model are consistent with evidence from granular matched bank-firm data from Peru. |
| Keywords: | Financial Specialization, Banking Structure, Information, Shocks, Financial Regulation |
| JEL: | D83 E44 G21 |
| Date: | 2025–09–30 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126320 |
| By: | Alejandro Casado (BANCO DE ESPAÑA); David Martínez-Miera (UC3M AND CEPR) |
| Abstract: | We document the geographical and sectoral specialization of banks’ lending activities using comprehensive data on the universe of loans to corporate borrowers in Spain. Our analysis highlights how specific sources of specialization are more relevant for evaluating different types of borrowers. Specifically, loans to micro- and small firms exhibit reduced probabilities of default in local markets where banks specialize, whereas loans to medium-sized and large firms experience lower probabilities of default in sectors in which banks specialize. Crucially, we provide the first evidence of a direct link between bank specialization and better quality private information held by banks, by leveraging confidential data on banks’ private risk assessments reported to regulators. We corroborate and benchmark our findings by comparing them to those obtained analyzing relationship lending, a well-established proxy for firm-specific private information. |
| Keywords: | bank lending, bank specialization, financial stability, probability of default, private information |
| JEL: | D82 E58 G21 G32 L10 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:bde:wpaper:2539 |
| By: | Forkuo, Gabriel Osei; Emmanuel, Osei-Dwomoh; Nkuah, Joseph Kofi |
| Abstract: | This study explored the critical relationship between corporate governance practices and the incidence of bank failures in Ghana, a key issue for the nation's financial stability and economic resilience. While Ghana's banking sector has undergone significant modernization, recent high-profile bank failures have cast doubt on the effectiveness of existing governance and regulatory frameworks. This research quantitatively investigates how core governance factors—specifically board composition, risk management, and regulatory compliance—influence bank stability. Analyzing data from 30 banks, the study employs descriptive, correlation, and regression analyses to assess governance practices and their linkage to financial distress indicators. The findings reveal a significant relationship between board independence, robust risk management, regulatory compliance, and a reduced likelihood of bank failure. Notably, a higher proportion of independent directors and stronger adherence to regulatory and corporate governance codes are associated with lower non-performing loan ratios and fewer regulatory interventions. These results highlight persistent gaps in governance that contribute to financial distress and underscore the necessity of strengthening Ghana's banking oversight. The study provides valuable, evidence-based insights for policymakers, regulators, and banking institutions on enhancing governance frameworks to prevent future crises and foster a more resilient financial sector. |
| Keywords: | Corporate Governance, Bank Failures, Financial Stability, Board Composition, Regulatory Compliance, Risk Management, Ghana |
| JEL: | E3 E31 E32 E52 E58 E6 E61 E63 E66 G2 G20 G21 G22 G23 G24 G28 H5 |
| Date: | 2025–10–03 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:126358 |
| By: | L. Randall Wray; Eric Lin |
| Abstract: | This paper looks at the relationship between government budget deficits and the growth rate of GDP. While orthodox economic theory offers several reasons to believe that growing deficits might be associated with slower growth, and would ultimately be unsustainable, Keynesians assert that deficits could stimulate growth--at least in the short run--implying the relation between deficits and growth could be positive. Modern Money Theory, adopting Godley's sectoral balance approach, Lerner's functional finance approach, and Minsky's theory of financial instability takes a more nuanced approach. Historical data for a number of countries is presented, showing that there is no obvious relation between the deficit ratio and economic growth over long time periods. However, there is a predictable path of the relationship over the course of the business cycle for all countries examined. |
| Keywords: | government budget deficit; deficit ratio; GDP growth rate; MMT; sectoral balance; functional finance; Wray curve; automatic stabilizer; Godley; Lerner |
| JEL: | F30 N10 N14 P16 |
| Date: | 2024–09 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1055 |
| By: | Tanweer Akram; Shahida Pervin |
| Abstract: | This paper econometrically models the dynamics of long-term Chinese government bond (CGB) yields based on key macroeconomic and financial variables. It deploys autoregressive distributive lag (ARDL) models to examine whether the short-term interest rate has a decisive influence on the long-term CGB yield, after controlling for various macroeconomic and financial variables, such as inflation or core inflation, the growth of industrial production, the percentage change in the stock price index, the exchange rate of the Chinese yuan, and the balance sheet of the People's Bank of China (PBOC). The findings show that the short-term interest rate has an economically and statistically significant effect on the long-term CGB yield of various maturity tenors. John Maynard Keynes claimed that the central bank’s policy rate exerts an important influence over long-term government bond yields through the short-term interest rate. The paper's findings evince that Keynes's claim holds for China, implying that the PBOC's actions are a driver of the long-term CGB yield. This means that policymakers in China have considerable leeway in fiscal and monetary operations, government deficit finance, and central government debt management. |
| Keywords: | Chinese Government Bonds; Long-term Interest Rates; Short-term Interest Rates; People’s Bank of China; John Maynard Keynes |
| JEL: | E43 E50 E58 E60 G10 G12 |
| Date: | 2024–02 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1044 |
| By: | Francesco Zezza |
| Abstract: | Following the Great Financial Crisis of 2008-9, there has been a shift in mainstream economic policy modeling toward "realism, " with dynamic stochastic general equilibrium (DSGE) models partly diverging from the representative agent framework, and large-scale, New-Keynesian structural models addressing real-financial interactions in greater detail. Still, the need for tractability of the former, and the lack of theoretical structure of the latter prevented the complete introduction of a modern--and complex--multi-sector/multi-asset financial system in policy models in use at central banks and treasuries. However, empirical models adopting the Stock-Flow Consistent (SFC) approach resolved most of these complications with a surge in the number of country models over the last few years. The present work lays out the main out-of-sample features of a quarterly SFC model of the Italian economy (MITA). |
| Keywords: | Empirical Stock-Flow Consistent Models; Monetary Policy; Fiscal Policy; Italy |
| JEL: | C54 E12 E17 E44 E58 |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1063 |
| By: | Venkat Hariharan Asha; Ajay Ojha; Sutharson T; Lekha S. Chakraborty |
| Abstract: | Using high-frequency data, the paper analyzes the link between public infrastructure investment and private corporate investment in India for the decade ending 2023–24. We adopt the ARDL model to investigate the existence of cointegration and find strong evidence of the crowding-in of private corporate investment both in the long- and short-run analyses. Moreover, long-term real interest rates and foreign direct investment provide higher estimates of crowding-in vis-Ã -vis short-term real interest rates and foreign portfolio investment, which underscore greater emphasis on systemic and fundamental factors (as compared to transitory factors) and the effectiveness of monetary policy. The recent thrust on deregulation and sustained enhancement in capital expenditure augur well in providing the necessary ambience to boost private investment and economic growth in the medium term. |
| Keywords: | Public Infrastructure Investment; Private Corporate Investment; Crowding-in effects; fiscal policy |
| JEL: | E62 C32 H6 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1097 |
| By: | Arturo Huerta G. |
| Abstract: | For Matias Vernengo and Esteban Perez Caldentey (2020), the MMT literature overemphasizes the choice of the exchange rate regime and the relevance of a flexible exchange rate regime, as well as the ultimate effect of that choice upon the policy space. In addition, they argue that the role of capital flows is underexplored, and that the relevance of the balance-of-payments constraint is often underestimated. Vernengo and Perez's criticism fails to consider that exchange-rate flexibility makes it possible to use flexible fiscal and monetary policies as well, to boost growth and employment, and to reduce the balance-of-payments constraint. |
| Keywords: | Capital Mobility; Currency; Exchange Rate; Financial Sector; Fiscal Policy; Foreign; Exchange Policy; Government Spending; Interest Rates; Monetary Policy; Real Activity |
| JEL: | E42 E43 E44 O23 O24 |
| Date: | 2024–06 |
| URL: | https://d.repec.org/n?u=RePEc:lev:wrkpap:wp_1052 |
| By: | Neha Bairoliya; Areendam Chanda; Jingyi Fang; Fang Yang |
| Abstract: | The canonical prediction of life-cycle models, that individuals smooth consumption over their lifetime, has been mostly tested for developed countries and found little empirical support. We provide a novel, developing country perspective by analyzing patterns of life-cycle consumption, income and savings rates in India. In contrast to the U.S., Indian households exhibit no growth in nondurable consumption expenditures after adjusting for family size. We present evidence that saving for lumpy investments in consumer durables is a key driver of high savings rates and flat nondurable consumption over the life cycle in India. |
| Keywords: | consumption; savings rate; demographics; life-cycle; durables; asset accumulation; household heterogeneity; panel data; pseudopanel; equivalence scales |
| JEL: | E21 J10 |
| Date: | 2025–10–14 |
| URL: | https://d.repec.org/n?u=RePEc:fip:feddwp:101973 |
| By: | Vellore Arthi; Gary Richardson; Mark Van Orden |
| Abstract: | From 1900 to 1940, ordinary working- and middle-class families saved for retirement and contingencies via ordinary life insurance policies. These policies combined insurance and savings in a single financial instrument that paid its face value to insured individuals who survived until maturity and to beneficiaries if the insured died before the maturity date. The popularity of these policies peaked before WWII when a substantial share of all households and most of the middle class invested in them. This paper explains why these policies were the most popular savings vehicle of their day. Ordinary life policies were well suited to the early twentieth-century economic environment. They had good returns; low risks; tax advantages; and little correlation with returns of competing investments, like bank deposits, building and loan shares, postal savings deposits, real estate, or stocks. The policies protected households from poverty in old age, from the premature death of their breadwinner, and from other risks including disability and deflation. Understanding how households saved in the past has implications for a wide range of literatures in the social sciences. |
| JEL: | G22 G51 G52 J26 J32 N21 N22 N31 N32 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34385 |
| By: | Gregory Clark (University of Southern Denmark); Neil Cummins (London School of Economics) |
| Abstract: | What happens across generations to random wealth shocks? Do they endure and even magnify, or do they dissipate? By implication, how much of modern wealth is attributable to events before 1900? This paper uses random shocks to family size in England before 1880, that created wealth shocks for the children, to measure the persistence of random wealth shocks. Fertility for married couples in England before 1880 was not controlled, but was a biological lottery. And for richer families, family size strongly influenced child wealth. This paper finds that such biology-induced wealth shocks had no impact on descendent wealth by three generations later. Since wealth itself persisted strongly across more than five generations this implies that, in the long run, wealth mainly derives from sources other than wealth inheritance itself. The observed link between nineteenth century wealth and modern wealth does not lie in wealth transmission itself. Instead wealth persisted because of the inheritance within families of behaviors and abilities associated with wealth accumulation and wealth retention. |
| Keywords: | Wealth shocks, wealth persistence, wealth inheritance |
| JEL: | D31 E21 G51 N33 |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:hes:wpaper:0284 |
| By: | Daniela Balutel (York University) |
| Abstract: | This study explores public perceptions of Bitcoin prices and the factors shaping them using data from the Bitcoin omnibus survey conducted by the Bank of Canada from 2017 to 2021. Through regression analysis and Oaxaca–Blinder decomposition, I examine differences in price expectations between Bitcoin owners and nonowners. Additionally, I investigate how demographic characteristics, Bitcoin knowledge, and financial literacy influence these views. My findings reveal significant disparities, with owners consistently more optimistic about future prices than nonowners. The Oaxaca–Blinder decomposition shows that only a small portion of this gap is explained by observable characteristics, suggesting the presence of unobserved influences. Bitcoin knowledge emerges as a key explanatory variable, accounting for much of the explained difference, while demographic factors—such as age, gender, and education—also play important roles. |
| Date: | 2025–10–05 |
| URL: | https://d.repec.org/n?u=RePEc:boc:cand25:01 |
| By: | Bertille Daran (UMR PSAE - Paris-Saclay Applied Economics - AgroParisTech - Université Paris-Saclay - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique - ENPC - École nationale des ponts et chaussées - IP Paris - Institut Polytechnique de Paris); Clément Nedoncelle (BETA - Bureau d'Économie Théorique et Appliquée - AgroParisTech - UNISTRA - Université de Strasbourg - Université de Haute-Alsace (UHA) - Université de Haute-Alsace (UHA) Mulhouse - Colmar - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Climate aid is an international financial flow that promotes mitigation and adaptation to climate change while supporting local economic development. These flows may have unintended consequences, potentially exacerbating environmental degradation. This study examines the impact of climate aid on deforestation in Africa from 2001 to 2021. Using a novel dataset of geocoded aid projects that we classify as pursuing climate-related objectives by applying a machine learning model, we find evidence of a causal link between climate aid and forest loss. On average, deforestation increases by 94 hectares for every additional 1 million USD of geocoded climate aid projects disbursed. Over the complete period and spatial extent, 5% of deforestation is linked to the disbursement of climate aid projects. These effects are heterogeneous and vary by initial forest cover: aid increases deforestation in densely forested areas, while it appears to reduce deforestation where forest cover was initially sparse. Analysis of the mechanisms suggests that the effects are primarily driven by economic funding for mitigation, production-related activities, and particularly agricultural expansion. |
| Abstract: | L'aide climatique est un flux financier international qui favorise l'atténuation et l'adaptation au changement climatique tout en soutenant le développement économique local. Ces flux peuvent avoir des conséquences imprévues, susceptibles d'aggraver la dégradation de l'environnement. Cette étude examine l'impact de l'aide climatique sur la déforestation en Afrique entre 2001 et 2021. À l'aide d'un nouvel ensemble de données géocodées sur les projets d'aide que nous classons comme poursuivant des objectifs liés au climat en appliquant un modèle d'apprentissage automatique, nous avons trouvé des preuves d'un lien de causalité entre l'aide climatique et la perte de forêts. En moyenne, la déforestation augmente de 94 hectares pour chaque million de dollars supplémentaires versés dans le cadre de projets d'aide climatique géocodés. Sur l'ensemble de la période et de l'étendue spatiale, 5 % de la déforestation est liée au versement de projets d'aide climatique. Ces effets sont hétérogènes et varient en fonction de la couverture forestière initiale : l'aide augmente la déforestation dans les zones densément boisées, tandis qu'elle semble la réduire là où la couverture forestière était initialement clairsemée. L'analyse des mécanismes suggère que ces effets sont principalement dus au financement économique des activités d'atténuation, des activités liées à la production et, en particulier, de l'expansion agricole. |
| Keywords: | Land conversion, Tropical deforestation, Mitigation and adaptation |
| Date: | 2025–10 |
| URL: | https://d.repec.org/n?u=RePEc:hal:ciredw:hal-05310970 |