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on Financial Development and Growth |
| By: | Efobi, Uchenna; Asongu, Simplice; Okafor, Chinelo; Tchamyou, Vanessa; Tanankem, Belmondo |
| Abstract: | The paper assesses how remittances directly and indirectly affect industrialisation using a panel of 49 African countries for the period 1980-2014. The indirect impact is assessed through financial development channels. The empirical evidence is based on three interactive and non-interactive simultaneity-robust estimation techniques, namely: (i) Instrumental Fixed Effects (FE) to control for the unobserved heterogeneity; (ii) Generalised Method of Moments (GMM) to control for persistence in industrialisation and (iii) Instrumental Quantile Regressions (QR) to account for initial levels of industrialisation. The non-interactive specification elucidates direct effects of remittances on industrialisation whereas interactive specifications explain indirect impacts. The findings broadly show that for certain initial levels of industrialisation, remittances can drive industrialisation through the financial development mechanism. Policy implications are discussed. |
| Keywords: | Africa; Diaspora; Financial development; Industrialisation; Remittances |
| JEL: | F24 F43 G20 O55 |
| Date: | 2019–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:93533&r=all |
| By: | Antonio Alvarez; Alejandro Fernandez; Joaquin Garcia-Cabo; Diana Posada |
| Abstract: | This study attempts to evaluate the impact of an increase in banks' funding stress and its transmission to the real economy, taking into account different funding sources banks can rely on. Using aggregate data from eight Euro area financial systems, we find that following a liquidity funding shock, both credit and GDP decline in different amounts and lengths. GDP reverts faster than credit. Furthermore, periphery countries experience a more pronounced fall in deposits and credit growth and the negative effects from the shock last longer than in core countries. Banks' funding seems to play a relevant role as periphery countries rely more on wholesale funding during normal times. |
| Keywords: | Liquidity funding shocks ; ECB policy ; Euro Area |
| JEL: | E50 E58 |
| Date: | 2019–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgif:1245&r=all |
| By: | Hoffmann, Mathias; Maslov, Egor; Sørensen, Bent E |
| Abstract: | Abstract Small businesses (SMEs) depend on banks for credit. We show that the severity of the Eurozone crisis was worse in countries that borrowed more from domestic banks (``domestic bank dependence'') compared with countries that borrowed more from international banks. Eurozone banking integration in the years 2000-2008 involved cross-border lending between banks while foreign banks' lending to the real sector stayed flat. Hence, SMEs remained dependent on domestic banks and were vulnerable to global banking sector shocks. We confirm, using a calibrated quantitative model, that domestic bank dependence makes sectors and countries with many SMEs vulnerable to global banking shocks. |
| Keywords: | Banking integration; domestic bank dependence; International Transmission; Small and medium enterprises; sme access to finance |
| JEL: | F30 F36 F40 |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:13691&r=all |
| By: | Wenjie Chen; Mico Mrkaic; Malhar S Nabar |
| Abstract: | This paper takes stock of the global economic recovery a decade after the 2008 financial crisis. Output losses after the crisis appear to be persistent, irrespective of whether a country suffered a banking crisis in 2007–08. Sluggish investment was a key channel through which these losses registered, accompanied by long-lasting capital and total factor productivity shortfalls relative to precrisis trends. Policy choices preceding the crisis and in its immediate aftermath influenced postcrisis variation in output. Underscoring the importance of macroprudential policies and effective supervision, countries with greater financial vulnerabilities in the precrisis years suffered larger output losses after the crisis. Countries with stronger precrisis fiscal positions and those with more flexible exchange rate regimes experienced smaller losses. Unprecedented and exceptional policy actions taken after the crisis helped mitigate countries’ postcrisis output losses. |
| Date: | 2019–04–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:19/83&r=all |
| By: | Gareth Anderson; Rebecca Riley; Garry Young |
| Abstract: | Exploiting differences in pre-crisis business banking relationships, we present evidence to suggest that restricted credit availability following the 2008 financial crisis increased the rate of business failure in the United Kingdom. But rather than "cleansing” the economy by accelerating the exit of the least productive businesses, we find that tighter credit conditions resulted in some businesses failing despite being more productive than their surviving competitors. We also find evidence that distressed banks protected highly leveraged, low productivity businesses from failure. |
| JEL: | D22 D24 G21 G30 L10 |
| Date: | 2019–05 |
| URL: | http://d.repec.org/n?u=RePEc:nsr:niesrd:503&r=all |
| By: | Paul Owusu Takyi (National Graduate Institute for Policy Studies, Tokyo, Japan); Roberto Leon-Gonzalez (National Graduate Institute for Policy Studies, Tokyo, Japan) |
| Abstract: | This paper examines the effectiveness of monetary policy and its implications for financially included and excluded households in Sub-Saharan African (SSA) economies, using an estimated New-Keynesian DSGE model. The model has financially included ( eoptimizing f) households coexisting with financially excluded ( ehand-to-mouth f) households. We exploit time series data on four SSA economies, spanning 1985-2016, to estimate the model fs parameters through Bayesian inference methods. Our estimation results show that the share of financially excluded households in these economies is relatively small, usually between 35% and 42%. This finding suggests that previous efforts to enhance financial inclusion in SSA have contributed to a general lowering of the cost of financial market participation. Our results also indicate that the monetary authorities in SSA countries have targeted inflation more aggressively than output growth. Further, the results of our Bayesian impulse response analysis suggests that a positive monetary policy shock does perform its intended role of significantly reducing inflation and output, despite a sizeable fraction of the population is financially excluded. Additionally, we find that a contractionary monetary policy tends to have differentiated impacts; it decreases consumption of financially excluded households more than that of financially included ones. The results reveal that financially included households are able to absorb shocks, and thus can smooth consumption more effectively than financially excluded households. Consequently, given that financially included households are better positioned to address shocks, it is recommended that monetary authorities in developing countries place greater emphasis on output growth relative to inflation. That shifting emphasis could support the stabilization of income, which would enable financially excluded households to smooth consumption. In addition, efforts to ensure full financial inclusion are recommended so that monetary policy can more fully achieve its objectives. |
| Date: | 2019–04 |
| URL: | http://d.repec.org/n?u=RePEc:ngi:dpaper:19-02&r=all |