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on Financial Development and Growth |
By: | Alessandro Villa |
Abstract: | Bank market power shapes firm investment and financing dynamics and hence affects the transmission of macroeconomic shocks. Motivated by a secular increase in the concentration of the US banking industry, I study bank market power through the lens of a dynamic general equilibrium model with oligopolistic banks and heterogeneous firms. The lack of competition allows banks to price discriminate and charge firm-specific markups in excess of default premia. In turn, the cross-sectional dispersion of markups amplifies the impact of macroeconomic shocks. During a crisis, banks exploit their market power to extract higher markups, inducing a larger decline in real activity. When a “big” (i.e., non-atomistic) bank fails, the remaining banks use their increased market power to control the supply of credit, worsening and prolonging the recession. The results suggest that bank market power could be an important concern when formulating appropriate bail-out polices. |
Keywords: | Dynamic Financial Oligopoly; Endogenous Financial Markups; Heterogeneous Firms; Firm Dynamics; Micro-Funded Financial Frictions; Price discrimination |
JEL: | D43 E44 G12 G21 L11 |
Date: | 2022–09–08 |
URL: | http://d.repec.org/n?u=RePEc:fip:fedhwp:94920&r=fdg |
By: | Kumwenda, Thomson; Mangani, Ronald; Mazalale, Jacob; Silumbu, Exley |
Abstract: | This study investigates the role of credit-supply factors in Malawian business cycles. A developing country banking sector is embedded into a Bayesian DGSE model using data for Malawi for the period 2004 to 2020. Financial intermediation in the model includes the issuance of loans to both households and firms, deposit mobilization, and actively financing of public debt to a cash-constrained central government treasury. Our study finds that banking sector shocks emanating from financing public debt plays a significant role in explaining variations in output in Malawi, both in the short and long run. Our study also finds that shocks from banking sector profits, intermediation role to household loans, entrepreneurs and firms do not have adverse effects on the fluctuation of output in Malawi which is contrary to the public sentiments. We also established that these shocks crowd-out private sector credit supply, and hence push interest rates up in the face of a liquidity-constrained treasury. These crowding outcomes are in the form of a trade-off of investment opportunities for banks. For every excess fund above the regulatory liquidity threshold, banks are more likely induced to invest only 20.96% in loans to households and 19.56% in loans to firms. |
Keywords: | Public Debt; Collaterals; Banks; Interest Rates; Crowding-Out |
JEL: | E30 E32 E43 E51 E52 |
Date: | 2022–10 |
URL: | http://d.repec.org/n?u=RePEc:cpm:dynare:077&r=fdg |
By: | Gibogwe, Vincent; Nigo, Ayine R.S.; Kufuor, Karen |
Abstract: | Tanzania has continued to experience an unprecedented increase in foreign direct investment (FDI) inflows for the past three decades. Using a vector error correction model (VECM) on data on Tanzania for the 1980–2020 period, we find the bi-causality between economic growth and FDI net inflows in the short and long run. The results imply that in Tanzania, FDI is associated with an increase in income; at the same time, economic growth leads to FDI eventually and stirs movements in FDI. We advocate for developing the local productive capacity and providing incentives to foreign firms so that they may provide positive spillovers to other sectors. |
Keywords: | foreign direct investment, economic growth, absorptive capacity, human capital, market liberalization |
JEL: | O11 O43 O47 O55 |
Date: | 2022–10–24 |
URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:115028&r=fdg |
By: | Bibi, Chan; Ali, Amjad |
Abstract: | Remittances are the part of migrant workers and essentially cash exchanges earned abroad and sent to their families. Worker remittances are an important part of international capital flows. The volume of remittances increments in developing countries day by day and season through season. Remittances are the backbone of developing economies. We have used annual cross-section data from the period 2014 from 100 developing countries including Afghanistan, Pakistan, Turkey, Bangladesh, Iraq, and China. Results show that there is a positive and insignificant relationship between remittances and human development in each of the selected developing countries. |
Keywords: | remittances, human development, developing countries |
JEL: | F24 J24 |
Date: | 2021 |
URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:114864&r=fdg |
By: | Engelbert Stockhammer |
Abstract: | The growth models approach (GMA) has become increasingly prominent in Comparative Political Economy over the last years. While it has originally been developed for advanced economies, there is a growing number of applications to developing countries. This raises the question how readily transferable the GMA concepts are to the peripheral capitalist experience. This paper explores the analytical building blocks for an extension of the growth models approach to developing economies from post-Keynesian-structuralist perspective. It argues, that in a developing country context supply-side considerations will be more important and builds on structuralist theory to understand the ‘real’ constraints in the developing countries growth process. It uses Minskyan theory to understand how currency hierarchy creates financial causes for international economic stratification. As a consequence the role of the state is more crucial than in advanced economies, but at the same time states are more vulnerable. The paper concludes by reflecting on the key concepts of GMA, finance-led, export-led and state-led growth in the light of developing economies and identifying neoliberal as well developmentalist versions of these. |
Keywords: | Comparative Political Economy, growth models, structuralism post-Keynesian Economics, developing economies |
JEL: | E60 F00 F30 O11 P10 |
Date: | 2022–11 |
URL: | http://d.repec.org/n?u=RePEc:pke:wpaper:pkwp2226&r=fdg |
By: | Reinhart,Carmen M. |
Abstract: | I discuss the multifaceted economic and financial vulnerabilities that have been created or exacerbated by the COVID-19 pandemic on a foundation of already weak economic fundamentals in many countries. Crises often do not travel alone. Banking, sovereign debt, exchange rate crashes, sudden stops, and inflation often intersect to become severe conglomerate crises. Historically, whether of the individual or conglomerate variety, crises influence the shape and speed of economic recovery. As the health crisis morphs into a financial or debt crisis in some countries, I discuss what may lie ahead in terms of the stages in crisis resolution and a brief reflection on how the resolution process can be expedited. |
Date: | 2021–04–07 |
URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9616&r=fdg |
By: | Feyen,Erik H.B.; Alonso Gispert,Tatiana; Kliatskova,Tatsiana; Mare,Davide Salvatore |
Abstract: | This paper introduces a new global database and a policy classification framework that records the financial sector policy response to the COVID-19 pandemic across 154 jurisdictions. It documents that authorities around the world have taken a diverse array of measures to mitigate financial distress in markets and for borrowers, and to support the provision of critical financial services to the real economy. Measures that focus on the banking sector constitute the majority of policies taken and aim to take advantage of the flexibility embedded in the international standards. However, emerging markets and developing economies tend to rely more on prudential measures that go beyond this embedded flexibility compared with advanced economies, which may reduce bank balance sheet transparency and increase risks. Using Cox proportional hazards and Poisson regressions, the paper takes initial steps to analyze the determinants of policy makers’ responsiveness and activity in emerging markets and developing economies, respectively. The results indicate that policy makers have typically been significantly more responsive and have taken more policy measures in emerging markets and developing economies that are richer and more populous. Countries with higher private debt levels tend to respond earlier with banking sector and liquidity and funding measures. The spread of COVID-19, macro-financial fundamentals, and fiscal and containment policies appear to play a limited role. In a substantially smaller sample, the paper explores the role of banking characteristics and finds that emerging markets and developing economies with higher private credit levels and that have adopted Basel III features have taken fewer policy measures. Future work is necessary for better understanding the country determinants of the policy response as well as the effectiveness and potential unintended consequences of the measures. |
Keywords: | Financial Sector Policy,Health Care Services Industry,Public Health Promotion |
Date: | 2020–12–14 |
URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9497&r=fdg |
By: | Viral V. Acharya; Abhiman Das; Nirupama Kulkarni; Prachi Mishra; Nagpurnanand R. Prabhala |
Abstract: | We study a bank run in India in which private bank branches experience sudden and considerable loss of deposits that seek safety in state-owned public sector banks (PSBs). We trace the consequences of this reallocation using granular data on bank-firm relationships and branch balance sheets. The flight to safety is not a flight to quality. Lending shrinks and credit quality improves at the run banks but worsens at the recipient PSBs. The effects are pronounced in weaker PSBs, the ones more likely to exploit the shelter of state ownership. The resource reallocation is inefficient in the aggregate. |
JEL: | G23 G28 G33 O43 |
Date: | 2022–10 |
URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:30557&r=fdg |
By: | Arghyrou, Michael G; Gadea, Maria-Dolores; Kontonikas, Alexandros |
Abstract: | We use a panel of ten euro area member states to examine the link between macro/fiscal risk and private bank deposits relative to Germany. Our main findings are summarised as follows: First, the relationship between relative deposits and macro/fiscal risk factors is not stable over time. Second, the significant time variation characterizing this relationship is driven by aggregate EMU-wide macro/fiscal risk conditions. Third, relative deposits in periphery EMU countries are generally more responsive to macro/fiscal risk. Fourth, the ECB’s unconventional monetary policy moderated the effect of the global financial and European debt crises on the relationship between relative deposits and macro/fiscal risk. Our empirical findings can inform the ongoing policy debate regarding the completion of the European Banking Union. |
Keywords: | Private bank deposits, macro/fiscal risk, euro area, TVP panel |
Date: | 2022–10–19 |
URL: | http://d.repec.org/n?u=RePEc:esy:uefcwp:33708&r=fdg |
By: | Tam NguyenHuu (Leuphana Universitat Luneburg); Deniz Karaman Orsal (Hamburg Universitat) |
Abstract: | We investigate the impacts of geopolitical risks (GPRs) on financial stress (FS) in major emerging economies between 1985 and 2019. Applying a recently developed panel quantile estimation method, we show that GPRs pose serious risks to the stability of the financial condition in emerging economies. Namely, when FS is already equal to or above average, GPRs intensify this instability to a remarkable degree. In contrast, GPRs do not ignite the stress when the financial situation is benign. In emerging economies, foreign exchange markets, and to a lesser extent, the banking industry, and the debt market suffer more severe consequences of geopolitical tensions than the stock market. In contrast, advanced economies, represented by the Group of Seven (G7) economies, have witnessed detrimental consequences of GPRs on their stock markets but negligible effects on other parts of their financial systems. |
Keywords: | geopolitical risks; financial stress; emerging economies; stock market; banking sector; foreign exchange market; debt market |
JEL: | G |
Date: | 2022 |
URL: | http://d.repec.org/n?u=RePEc:inf:wpaper:2022.09&r=fdg |
By: | Rogelio V. Mercado, Jr. (South East Asian Central Banks (SEACEN) Research and Training Centre); Victor Pontines (South East Asian Central Banks (SEACEN) Research and Training Centre) |
Abstract: | This paper employs Bayesian model averaging (BMA) and uses posterior inclusion probability (PIP) values to evaluate which financial inclusion indicators, dimensions, and other determinants of income inequality should be considered in an empirical specification assessing the relationship between financial inclusion and income inequality, given model uncertainty. The results show that for the low-income country group, financial access and usage indicators and dimensions are the most relevant indicators. Unfortunately, nowhere in our baseline results and in almost all our sensitivity tests do we find PIP values higher than our set threshold value for any of our financial depth indicators and dimension. These results suggest that theoretical models linking financial inclusion nd income inequality could well focus on the role of financial access and usage by providing theoretical foundations on the mechanics as to how these two dimensions of financial inclusion impact income inequality. |
Keywords: | Bayesian model averaging, financial inclusion, income inequality, Bayesian inference |
JEL: | C11 C52 O15 O16 |
Date: | 2022–10 |
URL: | http://d.repec.org/n?u=RePEc:sea:wpaper:wp47&r=fdg |
By: | Aklin,Michael; Kern,Andreas; Negre,Mario |
Abstract: | Since the 1980s, income inequality has increased substantially in several countries. Yet the political logic that triggered rising inequality in some places but not in others remains poorly understood. This paper builds a theory that links central bank independence to these dynamics. It posits the existence of three mechanisms that tie central bank independence to inequality. First, central bank independence indirectly constrains fiscal policy and weakens a government's ability to engage in redistribution. Second, central bank independence incentivizes governments to deregulate financial markets, which generates a boom in asset values. These assets are predominantly in the hands of wealthier segments of the population. Third, to contain inflationary pressures, governments actively promote policies that weaken the bargaining power of workers. Together, these policies strengthen secular trends towards higher inequality according to standard indicators. Empirically, the analysis finds a strong relation between central bank independence and inequality, as well as support for each of the mechanisms. From a policy perspective, our findings contribute to knowledge on the undesirable side effects of central bank independence. |
Keywords: | Labor Markets,Rural Labor Markets,Macroeconomic Management,Poverty Reduction Strategies,Consumption,Fiscal&Monetary Policy,Financial Structures |
Date: | 2021–01–21 |
URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9522&r=fdg |
By: | Claire Giordano (Bank of Italy) |
Abstract: | Real effective exchange rate (REER) imbalances may affect economic growth by altering the allocation of labour and capital across sectors. This study assesses whether the component of inter-sectoral production factor misallocation induced by REER misalignments significantly hinders economic development and if this is the only channel via which REER imbalances operate. REER misalignments are derived from a Behavioural Equilibrium Exchange Rate model; labour misallocation and capital misallocation are measured, according to two alternative indicators, on a unique cross-country cross-sector national account dataset of 54 economies and 12 sectors over the years 1980-2015. Both REER over- and undervaluations lead to increased across-sector labour (but not capital) misallocation and, uniquely via this channel, they significantly hamper real growth. The correction of these external imbalances would thus stimulate inter-sectoral allocative efficiency and, ultimately, economic activity. |
Keywords: | external imbalances, real effective exchange rate misalignments, labour misallocation, capital misallocation, economic development |
JEL: | F40 F43 O11 O14 O19 |
Date: | 2022–10 |
URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1385_22&r=fdg |
By: | Louisa Chen; Estelle Xue Liu; Zijun Liu |
Abstract: | We show that capital flow (CF) volatility exerts an adverse effect on exchange rate (FX) volatility, regardless of whether capital controls have been put in place. However, this effect can be significantly moderated by certain macroeconomic fundamentals that reflect trade openness, foreign assets holdings, monetary policy easing, fiscal sustainability, and financial development. Passing the threshold levels of these macroeconomic fundamentals, the adverse effect of CF volatility may be negligible. We further construct an intuitive FX resilience measure, which provides an assessment of the strength of a country's exchange rates. |
Date: | 2022–10 |
URL: | http://d.repec.org/n?u=RePEc:arx:papers:2210.04648&r=fdg |
By: | Okot, Anjelo; Kaltenbrunner, Annina; Perez Ruiz, Daniel |
Abstract: | This paper investigates the determinants of nominal exchange rates, their volatility, and crash risk in Africa's lower and lower-middle income countries (LLMICs). It combines macro-panel estimations for 15 African LLMICs with floating or lightly managed exchange rates, with insights from 13 semi-structured interviews with 17 foreign exchange market participants in six case study countries. It shows the important role African LLMICs' distinct productive and export structure, concentrated in a few agricultural and mineral-based commodities, and recent financial integration for exchange rate determination. In particular, whereas productive factors such as terms of trade, export concentration, and export prices are found to have a significant impact on the exchange rate level and volatility, financial factors including the interest rate differential, international market conditions, and short-term financial flows, matter for the likelihood of currencies to experience sudden and large exchange rate movements. |
Date: | 2022 |
URL: | http://d.repec.org/n?u=RePEc:zbw:eibwps:202212&r=fdg |
By: | Kaltenbrunner, Annina; Perez Ruiz, Daniel; Okot, Anjelo |
Abstract: | This paper presents detailed insights into the microstructural characteristics of several African Lower and Lower-Middle Income Countries (LLMICs) foreign exchange markets and the implications of these characteristics for macroeconomic management. It draws on 13 semi-structured interviews with 17 foreign exchange experts in central banks, banks, non-bank financial institutions, and research institutions in selected case studies (Ghana, Kenya, Malawi, Sierra Leone, Uganda, and Zambia) and the City of London. The results show that whilst most case study countries have functioning foreign exchange interbank markets, these markets are oftentimes characterised by low, volatile and "lumpy" liquidity. These liquidity dynamics and uncertainty about future foreign exchange flows can lead to FX hoarding among foreign exchange market participants, further depriving the official foreign exchange market of liquidity. Moreover, they provide those with access to FX liquidity with significant market power and the potential to affect price dynamics. These microstructural characteristics, in turn have meant that central banks in African LLMICs remain key agents in foreign exchange markets to manage scarce and volatile liquidity patterns. At the same time though, these microstructural weaknesses complicate central banks' ability to deal with volatile foreign exchange availability and structural depreciation pressures. Whereas hoarding behaviour reduces the central bank's access to foreign exchange, low trust in domestic currencies puts serious limits on the extent of nominal depreciations central banks will be able and willing to tolerate. Overall, the results show the difficulties of moving towards floating exchange rates in the context of African LLMICs, characterised by concentrated export structures, low trust in their currencies, and shallow domestic financial markets. |
Date: | 2022 |
URL: | http://d.repec.org/n?u=RePEc:zbw:eibwps:202211&r=fdg |
By: | International Monetary Fund |
Abstract: | Since the 2008 Financial Sector Assessment Program (FSAP), the financial sector of the West African Economic and Monetary Union (WAEMU) has undergone major changes that have altered its risk profile. Three structural changes have played a key role since the 2008 FSAP: (i) the financial sector has grown significantly; (ii) regional banking groups have become dominant; and (iii) the high concentration of bank portfolios in sovereign exposures, which accounted for an average of 31 percent of banking assets at end-2020, are almost triple the level observed in 2004. These changes have altered the structure of systemic risks and vulnerabilities and raised the need for implementing reforms to strengthen the effectiveness of the macroprudential policy and banking supervision frameworks. |
Date: | 2022–09–23 |
URL: | http://d.repec.org/n?u=RePEc:imf:imfscr:2022/309&r=fdg |
By: | Carrasco Gutierrez, Carlos Enrique; Peixoto Messias, Iasmin Emillyn |
Abstract: | In this work we apply the arbitrage pricing theory (APT) model to study the effects of macroeconomic variables on investment strategies involving value and growth stocks listed on the Brazilian Stock Exchange (B3). To build and order the portfolios, we use four fundamental market indicators that permit identifying value and growth stocks. The macroeconomic variables used are real GDP, exchange rate, unemployment rate, money supply (M1), interest rate and consumer confidence index. The principal results are that growth strategies during the period studied were mainly influenced by unemployment, inflation and exchange while value strategies were preponderantly affected by GDP. In relation to the market risk factor, it was statistically significant for all the value and growth portfolios, and in general the market betas of the values stocks were greater than those of the growth stocks. |
Keywords: | value strategies, growth strategies, financial returns, APT, macroeconomic variables. |
JEL: | G1 G12 |
Date: | 2022–01–01 |
URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:114875&r=fdg |
By: | Paolo Finaldi Russo (Bank of Italy); Valentina Nigro (Bank of Italy); Sabrina Pastorelli (Bank of Italy) |
Abstract: | This paper identifies idiosyncratic credit supply shocks across firm size before and after the 2008-2013 double-dip recession in Italy. Based on a fixed effects model, the empirical framework includes both single- and multiple-lender firms and relaxes the standard assumption of homogeneous credit supply across borrowers from the same bank. Results highlight that following the crisis banks notably tightened their corporate lending policies except towards large companies. A significant difference in credit supply arose between micro-firms and the others. The divide is wider for larger banks and for those with weaker balance sheets. This may reflect the greater difficulties on the part of these financial intermediaries in disbursing loans to firms with a significant degree of informational opacity and with high fixed costs compared with the low unit volume of operations. According to these findings, the shocks that hit the banking system during the crisis translated into a persistent change in credit standards, with an important shift in the supply of new loans from smaller to larger firms. |
Keywords: | bank lending channel, credit constraints, SME financing, bank risk-taking |
JEL: | G21 G32 G3 |
Date: | 2022–10 |
URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_1383_22&r=fdg |
By: | Raphaël CHIAPPINI; Bertrand GROSLAMBERT; Olivier BRUNO |
Abstract: | We develop a new method for calculating bank output that addresses the flaws of the current approach of the System of National Accounts. We implement a simple model-free method that removes the “pure” credit risk premium from the production of banks while keeping the liquidity provision as part of the total bank output. Using both local projections and autoregressive distributed lag models, we show that our method produces bank output estimates that are consistent with the evolution of the economic activity and that remain always positive including during periods of financial stress. This method satisfies the four conditions set by the Inter-Secretariat Working Group on National Accounts. Furthermore, our method reveals that the banking output of the eurozone is overestimated by approximately 40 percent over the period 2003-2017. |
Keywords: | bank output, liquidity premium, risk premium, ARDL, local projections |
JEL: | E01 E44 |
Date: | 2022 |
URL: | http://d.repec.org/n?u=RePEc:grt:bdxewp:2022-20&r=fdg |
By: | ASDRUBALI Pierfederico; HALLAK Issam (European Commission - JRC); HARASZTOSI Peter (European Commission - JRC) |
Abstract: | In this paper we provide estimates of financial constraints in all EU sectors. Our empirical strategy consists in using the Orbis firm-level dataset to construct financial constraint measures for each of the firms in our sample, and then aggregate the results either by NACE code, or by business similarity. We use two main – somewhat complementary – financial constraint indices proposed by Ferrando et al (2015), and then submit them to a battery of robustness tests, including the alternative financial constraints estimators developed by Kaplan and Zingales (1997), Whited and Wu (2006), and Hadlock and Pierce (2010). We also establish correlations between a sector’s degree of financial constraints and other sectoral characteristics, such as firm size, TFP, capital intensity, and innovativeness. The results show that sectoral financial constraints do not converge for all indicators; yet there are sectors that classify at the bottom or top by two or more financial constraints measures. Tighter sectoral financial constraints tend to be associated with a lower firm size, a capital intensity much higher than average, and a total factor productivity lower than average. |
Keywords: | Financial constraints, capital intensity, firm size, productivity |
Date: | 2022–09 |
URL: | http://d.repec.org/n?u=RePEc:ipt:iptwpa:jrc130317&r=fdg |
By: | Aurelien K. Yeyouomo (University of Yaoundé 2, SOA, P.O. Box 1365); Simplice A. Asongu (Yaoundé, Cameroon) |
Abstract: | This study addresses the issue of financial innovation in developing countries, focusing specifically on the role fintechs have in closing the gender gap of financial inclusion in Sub-Saharan Africa (SSA) over the period 2011-2017. The empirical evidence is based on the multilevel tobit regression model fitted to panel data. The results of this study show that fintechs reduce the financial inclusion gender gap by mitigating the gender gap in access to and use of financial services. Furthermore, they cast doubt on the ability of fintechs development to bridge this gap on its own, and hint on the joint importance of targeted policy initiatives aimed at directly closing the gender gap to this end. These findings have important economic policy implications and provide evidence of improved economic conditions for women in terms of financial inclusion leading to a narrowing of the gender gap. |
Keywords: | Fintechs development, financial inclusion gender gap, Tobit, SSA |
Date: | 2022–10 |
URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:22/083&r=fdg |
By: | Magda Bianco (Bank of Italy); Daniela Marconi (Bank of Italy); Angela Romagnoli (Bank of Italy); Massimiliano Stacchini (Bank of Italy) |
Abstract: | Financial inclusion has received growing attention over the years as an enabling factor for promoting growth, reducing inequalities, and addressing poverty. In order to support policy choices aimed at enhancing financial inclusion, we investigate its main drivers, with a special focus on demand-side factors; more specifically, we enquire as to whether financial education may enhance financial inclusion. A cross-country analysis shows that, controlling for per capita GDP, higher levels of participation of individuals in economic life, greater financial knowledge and the existence of financial education strategies reduce the likelihood of a country being in the low financial inclusion segment. Moreover, as digitalization offers great opportunities to expand inclusion (but also some challenges), we provide evidence on the relationship between financial literacy and digital skills, showing that (at least in more advanced countries) digital skills are positively correlated with financial literacy from a young age. Based on our findings, we suggest some directions for future research, measurement and data collection, and policy actions. |
Keywords: | Financial inclusion, financial literacy, financial education |
JEL: | D14 G53 O38 |
Date: | 2022–10 |
URL: | http://d.repec.org/n?u=RePEc:bdi:opques:qef_723_22&r=fdg |
By: | Wang,Dieter |
Abstract: | Natural capital is related to government bonds through the macroeconomy and credit risks. This paper estimates this relationship from the long-term, between-country view and the short-term, within-country view. The paper cautions against the former, as it is dominated by income differences. These are de facto ingrained, as they cannot be overcome by short-term policy efforts. The within-country view is unaffected by the ingrained income bias and leaves room for recent natural capital changes to affect bond yields. The paper finds that non-renewables (fossil fuels and mineral assets) raise bond yields, possibly due to the resource curse. Renewables (forests and agricultural wealth) lower borrowing costs because they are economically worthwhile investments. Protected areas are more likely to be luxury investments. |
Keywords: | Food Security,Coastal and Marine Resources,Energy and Natural Resources,Forestry,Forests and Forestry,Financial Sector Policy |
Date: | 2021–04–01 |
URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:9606&r=fdg |