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on Financial Literacy and Education |
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Issue of 2024‒10‒07
four papers chosen by Viviana Di Giovinazzo, Università degli Studi di Milano-Bicocca |
| By: | Ozili, Peterson K |
| Abstract: | Digital innovations are emerging to solve known problems using new digital tools or technologies. Digital innovations also have wide application for financial inclusion. Private sector agents are using digital innovations to increase financial inclusion in remarkable ways. This chapter explores the recent digital innovations that are changing the financial inclusion landscape toward digital financial inclusion. The study used the discourse analysis methodology. It was found that digital innovations, such as central bank digital currency (CBDC), cryptocurrency, embedded finance, artificial intelligence, wallet as a service (WaaS), Fintech, Bigtech, and decentralized finance (DeFi), are helping to accelerate digital financial inclusion in many parts of the world. Each of these digital innovations serve a specific purpose, and they contribute to accelerating digital financial inclusion in unique ways, even though they all pose some risks that can be mitigated with careful and purposeful regulation. |
| Keywords: | Digital innovation; Financial inclusion; CBDC; Cryptocurrency; Embedded finance; Artificial intelligence; Wallet as a service; Fintech; Bigtech; DeFi. |
| JEL: | G21 O33 |
| Date: | 2024 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121848 |
| By: | Arogundade, Sodiq; Ngarachu, Maria; Bandele, Olayinka |
| Abstract: | In achieving the African Union Agenda 2063 – The Africa We Want – and financing SDGs, African economies will require an unprecedented mobilization of resources. This study examines the role of financial development on the nexus between domestic resource mobilization (DRM) and inclusive growth using an unbalanced panel of 31 African countries from 1990-2022. The study finds that: (1) in the presence of a sound financial sector, DRM contributes positively to inclusive growth; (2) African countries with higher inclusive growth benefit more from the positive impact of tax revenue than those with lower growth; (3) regional characteristics differ in terms of the impact of DRM on inclusive growth; and (4) countries must maintain an annual threshold of DRM and financial development to harness the benefits of DRM. The empirical results are robust to different measures of DRM and estimators (two-step system GMM, Machado and Silva quantile regression, and the dynamic panel threshold model). In leveraging the benefits of DRM, the study recommends that African governments should improve their financial sector, and they can learn from the success story of the South African Financial Sector Development and Reform Program. |
| Keywords: | Inclusive Growth, Domestic Resource Mobilization, Financial development, System GMM, Machado and Silva quantile regression, Dynamic Panel Threshold. |
| JEL: | D6 D60 H60 |
| Date: | 2024–09–13 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:122041 |
| By: | Mahmood, Asif; Ali, Ringchan |
| Abstract: | Emerging literature after the global financial crisis of 2007-08 have highlighted the important role of financial conditions as they provide a comprehensive snapshot of the overall economic health and stability. Following this, many academic researchers, central banks and international organizations developed several composite indices, commonly known as Financial Condition Index (indices) or FCIs. In this this study, we attempt to construct the monthly financial conditions index for Pakistan using high-frequency indicators from domestic and external markets. Our results show that much of the post GFC period in Pakistan’s financial system was characterized by accommodative financial conditions, with three but higher intensity phases of tighter financial conditions. Based on the constructed FCI, we also observed that current ongoing episode of tightening is on average longer than previous two phases. In terms of drivers, our estimations reveal the increasing role of interest rates in determining the financial conditions in Pakistan during the sample period. Moreover, the preliminary analysis does indicate some underlying qualities in our constructed FCI to forecast near-term growth with reasonable precision. |
| Keywords: | Financial Conditions Index, Principal Component Analysis, Forecasting |
| JEL: | C43 C53 E44 E52 |
| Date: | 2024–09–06 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:121952 |
| By: | Dawit Z. Assefa (Hult International Business School, London, UK); Alfonsina Iona (School of Economics and Finance, Queen Mary University of London); Leone Leonida (King’s Business School, King’s College) |
| Abstract: | This paper examines the relationship between political competition and financial development across a global sample of 127 countries, with a particular focus on developed and democratic OECD countries. Building on the theoretical frameworks of Acemoglu and Robinson (2006) and Besley et al. (2010), we explore whether political competition impacts financial development in a non-monotonic or monotonic manner. Using robust measures of financial development that capture both the depth and efficiency of the financial sector, we find a U-shaped relationship between political competition and financial development in the full sample, consistent with the political replacement effect of Acemoglu and Robinson. This result suggests that financial development is promoted when political competition is either very low or very high, but hindered at intermediate levels of competition. In contrast, we observe an S-shaped relationship in OECD countries, indicating that political competition at intermediate levels is particularly conducive to financial development in developed democracies. These findings provide new insights into the nuanced role political competition plays in shaping financial systems, challenging the assumption that more political competition always leads to greater financial development. Our results are robust to a range of estimation techniques and alternative measures of political competition and financial development. |
| Keywords: | Financial Development, Institutions, Democracy, Political Competition |
| JEL: | F36 O17 O43 |
| Date: | 2024–09–23 |
| URL: | https://d.repec.org/n?u=RePEc:qmw:qmwecw:981 |