New Economics Papers
on Microfinance
Issue of 2004‒12‒12
three papers chosen by
Aastha Pudasainee

  1. Financial Globalization, Growth and Volatility in Developing Countries By Eswar S. Prasad; Kenneth S. Rogoff; Shang-Jin Wei; M. Ayhan Kose
  2. Taxing Financial Activity By Jack M. Mintz

  1. By: Eswar S. Prasad; Kenneth S. Rogoff; Shang-Jin Wei; M. Ayhan Kose
    Abstract: This paper provides a comprehensive assessment of empirical evidence about the impact of financial globalization on growth and volatility in developing countries. The results suggest that it is difficult to establish a robust causal relationship between financial integration and economic growth. Furthermore, there is little evidence that developing countries have been consistently successful in using financial integration to stabilize fluctuations in consumption growth. However, we do find that financial globalization can be beneficial under the right circumstances. Empirically, good institutions and quality of governance are crucial in helping developing countries derive the benefits of globalization. Similarly, macroeconomic stability appears to be an important prerequisite for ensuring that financial globalization is beneficial for developing countries. Finally, countries that employ relatively flexible exchange rate regimes and succeed in maintaining fiscal discipline are more likely to enjoy the potential growth and stabilization benefits of financial globalization.
    JEL: F15 F36 F41 F43
    Date: 2004–12
  2. By: Jack M. Mintz (Rotman School of Management, University of Toronto, and the C.D. Howe Institute)
    Abstract: In most countries, substantial business activity is related to financial intermediation: banking, trusts, investment companies and insurance. Financial businesses play a crucial role in the economy by matching lenders with borrowers as well as facilitating governance of businesses through close monitoring of funds lent to businesses. Financial institutions also reduce risk faced by investors by pooling investments over many different types of business activities and insuring against property, casualty and death risks. A significant part of the financial sector is regulated but an impressive array of financial activities is undertaken by unregulated and informal parts of the economy. Unlike other industries, tax systems often treat financial activity in a special way. Why is this so? In this module, I shall review the rationale and technical issues related to the taxation of financial activity by answering the following questions: What is financial intermediation? What are the roles of financial service providers in the economy so as to guide policy makers regarding the appropriate design of taxes? How are individual types of taxes designed to deal with special considerations related to financial activities? What are the economic impacts of taxes on financial activity?
    Keywords: Financial institutions, taxation, financial intermediation, financial activity, policy, tax design
    Date: 2003–12
  3. By: Marcelo Braga Nonnemberg; Mario Jorge Cardoso de Mendonça
    Abstract: The objective of this study is to shed light on the determinants of foreign direct investiment (FDI) in developing countries. In order to undertake it, we performe a econometric model based in panel data analysis for 38 developing countries (including transition economies) for the 1975-2000 period. Among the major conclusions we have that the FDI is correlated to level of schooling, economy's degree of openness, risk and variables related to macroeconomic performance like inflation, risk and average rate of economic growth. The results also show that the FDI has been closely associated with stock market performance. Lastly, a causality test between FDI and GDP is performed. There is evidence of the existence of causality in sense that GDP leading to FDI, but not vice versa.
    JEL: F21 F43 F41
    Date: 2004

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