finance and the sources of growth at various stages of economic development this article studies the effects of financial development on the sources of growth in different groups of countries recent theoretical work shows that financial development may affect productivity and capital accumulation in different ways in industrial versus developing countries this hypothesis is tested with panel data from 74 countries using gmm dynamic panel techniques results are consistent with the hypothesis finance has a strong positive influence on productivity growth primarily in more developed economies in less developed economies the effect of finance on output growth occurs primarily through capital accumulation jel o4 g1

financial inclusion measurement spatial effects and influencing factors abstractusing the index of financial inclusion and the world bank global findex database this study measures the level of financial inclusion across countries the results reveal a geographical spatial aggregation distribution in which developed european and north american countries enjoy higher levels of financial inclusion than the less developed countries of africa and most of asia accordingly our spatial analysis proves our hypothesis and reveals dependence and aggregation effects among countries then we employ spatial econometric research to identify those factors significantly associated with financial inclusion the results show that an individual s income education and use of communications equipment are important factors that explain the level of financial inclusion while financial depth and banking health status are the main determinants building an inclusive financial system is an important means for most countries to achieve the millennium development goals

exposure to intimate partner violence and repayment of microcredit evidence from field experiments in bangladesh abstract this paper investigates the impact of intimate partner violence on poor women s repayment behavior in microcredit in a laboratory based field experiment we extended collateral free small loans to 485 currently married women in rural bangladesh and observed their repayment decisions over multiple loan cycles in a post experiment survey we asked subjects about their experience of spousal violence we find that women who experienced physical or sexual violence in the last 12 months are more likely to strategically default on their loans relative to those who did not experience such violence we conducted several robustness tests and the results suggest that the negative correlation between victimization and loan repayment rates is unlikely to be explained by selection into victimization non random underreporting of violence or the subjects attitude toward risk

distance constraints the limits of foreign lending in poor economies how far does mobility of multinational banks solve problems of financial development using a panel of 80 000 loans over 7 years i show that greater cultural and geographical distance between a foreign bank s headquarters and local branches leads it to further avoid lending to informationally difficult yet fundamentally sound firms requiring relational contracting greater distance also makes them less likely to bilaterally renegotiate and less successful at recovering defaults differences in bank size legal institutions risk preferences or unobserved borrower heterogeneity cannot explain these results these distance constraints can be large enough to permanently exclude certain sectors of the economy from financing by foreign banks

markets and institutions in financial intermediation national characteristics as determinants abstract given the importance of financial intermediation and the rise of globalization there is little prior research on how national preferences for financial intermediation markets versus institutions are determined by cultural legal and other national characteristics using panel analysis for data on a recent 8 year period for 30 countries this paper documents that national preferences for market financing increase with political stability societal openness economic inequality and equity market concentration and decreases with regulatory quality and ambiguity aversion we confirm with robustness tests that our result for regulatory quality is independent of differences in national wealth and that our result for political stability is independent of both wealth and political legitimacy these results should be of much interest to managers scholars regulators and policy makers

cross country variation in household access to financial services abstract this paper presents estimates for more than 160 countries of the fraction of the adult population using formal financial intermediaries the estimates are constructed by combining information on account numbers at banks and microfinance institutions together with banking depth and gdp data with estimates from household surveys for a smaller set of countries an illustrative application of the data compares them with information on poverty there is a correlation but it is not clearly causal

the pecking order of segmentation and liquidity injection policies in a model of contagious crises we study a two country setting in which leveraged investors generate fire sale externalities leading to financial crises and contagion governments can affect the incidence of financial crisis and the degree of contagion by injecting public liquidity and additionally by segmenting the countries liquidity markets we show that segmentation allows a country to avoid contagion and fend off mild financial crises caused by a small shock to its liquidity demand at the cost of exposing it to more severe financial crises caused by a large shock we derive a pecking order result whereby segmentation is a second best measure that coordinated governments should use only when tax capacity constrains them from injecting liquidity even when segmentation is welfare enhancing it should be applied to public liquidity alone never restricting the free flow of private liquidity across countries uncoordinated governments tend to use segmentation excessively

the increasing complementarity between cognitive and social skills abstract data linking 1972 and 1992 adolescent skill endowments to adult outcomes reveal increasing complementarity between cognitive and social skills in fact previously noted growth in demand for cognitive skills affected only individuals with strong endowments of both social and cognitive skills these findings are corroborated using census and cps data matched with dictionary of occupational titles dot job task measures employment in and earnings premia to occupations requiring high levels of both cognitive and social skill grew substantially compared with occupations that require only one or neither type of skill and this emerging feature of the labor market has persisted into the new millennium

the mirage of fixed exchange rates this paper discusses the profound difficulties of maintaining fixed exchange rates in a world of expanding global capital markets contrary to popular wisdom industrialized country monetary authorities easily have the resources to defend exchange parities against virtually any private speculative attack but if their commitment to use those resources lacks credibility with markets the costs to the broader economy of defending an exchange rate peg can be very high the dynamic interplay between credibility and commitment is illustrated by the 1992 swedish and british crises and the 1994 95 mexican collapse we also discuss the small number of successful fixers

interaction between housing prices and household borrowing the finnish case abstract employing time series econometrics this study shows that there has been a significant two way interaction between housing prices and housing loan stock in finland since the financial liberalization in the late 1980s before the financial deregulation the interaction was substantially weaker furthermore housing appreciation has a notable positive impact on the outstanding consumption loan stock it appears that there is no similar relationship between stock prices and credit understanding the two way interaction between housing prices and credit is of importance since the interdependence is likely to augment boom bust cycles in the economy and increase the fragility of the financial sector

is the international convergence of capital adequacy regulation desirable the merit of international convergence of bank capital requirements in the presence of divergent closure policies of diierent central banks is examined the lack of a complementary variation between minimum bank capital requirements and regulatory forbearance leads to a spillover from more forbearing to less forbearing economies and reduces the competitive advantage of banks in less forbearing economies linking the central bank s forbearance to its alignment with domestic bank owners it is shown that in equilibrium a regression toward the worst closure policy may result the central banks of initially less forbearing economies also adopt greater forbearance i analyze the joint design of two bank regulatory mechanisms minimum capital requirements which are an ex ante mechanism to prevent bank failures and closure policy which is an ex post mechanism to manage the cost of bank failures at the heart of the paper is a simple but fundamental point ex post policies affect ex ante incentives and hence the design of an ex ante mechanism must take into account any feedback from the ex post policies the optimal design of capital requirements is thus tied to the extent of forbearance exercised by the central bank s closure policy this warrants a closer scrutiny of the merits of creating a level playing eld in capital requirements across countries as proposed and

financial access and exclusion in kenya and uganda abstract policy emphasis has recently shifted to finance for all given evidence that financial sector development contributes to growth but effects on poverty do not arise from pro poor provision we argue that given this policy goal analyses of barriers to access must be country specific and go beyond the emphasis on transactions costs to incorporate the effects of social institutions since these contribute to discrimination this paper uses data from financial access surveys carried out in 2006 in kenya and uganda to investigate the socio economic demographic and geographical factors influencing access to and exclusion from formal semi formal and informal financial services

reaching out access to and use of banking services across countries the authors 1 present new indicators of banking sector penetration across 99 countries based on a survey of bank regulatory authorities 2 show that these indicators predict household and firm use of banking services 3 explore the association between the outreach indicators and measures of financial institutional and infrastructure development across countries and 4 relate these banking outreach indicators to measures of firms financing constraints in particular they find that greater outreach is correlated with standard measures of financial development as well as with economic activity controlling for these factors the authors find that better communication and transport infrastructure and better governance are also associated with greater outreach government ownership of financial institutions translates into lower access while more concentrated banking systems are associated with greater outreach finally firms in countries with higher branch and atm penetration and higher use of loan services report lower financing obstacles thus linking banking sector outreach to the alleviation of firms financing constraints

immigration remittances and business cycles we use data on border enforcement and macroeconomic indicators from the united states and mexico to estimate a two country business cycle model of labor migration and remittances the model matches the cyclical dynamics of labor migration to the united states and documents how remittances to mexico serve an insurance role to smooth consumption across the border during expansions in the destination economy immigration increases with the expected stream of future wage gains but it is dampened by a sunk migration cost that reflects the intensity of border enforcement during recessions established migrants are deterred from returning to their country of origin which places an additional downward pressure on the wage of native unskilled workers thus migration barriers reduce the ability of the stock of immigrant labor to adjust during the cycle enhancing the volatility of unskilled wages and remittances we quantify the welfare implications of various immigration policies for the destination economy

the regulator s trade off bank supervision vs minimum capital abstract we develop a simple model of banking regulation with two policy instruments minimum capital requirements and the supervision of domestic banks the regulator faces a trade off high capital requirements cause a drop in the banks profitability whereas strict supervision reduces the scope of intermediation and is costly for taxpayers we show that a mix of both instruments minimises the costs of preventing the collapse of financial intermediation once we allow for cross border banking the optimal policy is not feasible if domestic supervisory effort is not observable our model predicts a race to the bottom in capital requirement regulation therefore countries are better off by harmonising regulation on an international standard

remittances and financial access is there really a link and for whom evidence from mexican household data in policy discussions it has frequently been claimed that migrants remittances could function as a catalyst for financial access among receiving households this paper provides empirical evidence on this hypothesis from mexico a major receiver of remittances worldwide using the mexican family life survey panel mxfls for 2002 and 2005 the results from the fixed effects logit model show that receiving remittances is strongly correlated with the ownership of savings accounts and to a limited degree with the availability of borrowing options effects are particularly important for microfinance institutions and more important for rural households compared to urban households

information and bank credit allocation abstract private information obtained by lenders leads to borrower capture to the extent that such information cannot be communicated credibly to outsiders we analyze how this capture affects the loan portfolio allocation of informed lenders first we show that banks charge higher interest rates and finance relatively less creditworthy borrowers in market segments with greater information asymmetries second when faced with greater competition from outside lenders banks reallocate credit toward more captured borrowers flight to captivity third if borrower quality and captivity are sufficiently correlated an increase in the competitiveness of uninformed lenders can worsen the informed lender s overall loan portfolio the model explains observed consequences of financial liberalizations

why do people save in cash distrust memories of banking crises weak institutions and dollarization abstract the paper analyzes why households hold sizeable shares of their assets in cash at home rather than at banks a phenomenon that is widespread in many economies but for which information is scarce using survey data from ten central eastern and southeastern european countries i document the relevance of this behavior and show that cash preferences cannot be fully explained by whether people are banked or unbanked the analysis reveals that a lack of trust in banks memories of past banking crises and weak tax enforcement are important factors moreover cash preferences are stronger in dollarized economies where a safe foreign currency serves as a store of value

skills signals and employability an experimental investigation abstract because most skills of labor market entrants are not directly observed by employers individuals acquire skill signals to study which signals are valued by employers we randomize several skill signals on resumes of fictitious applicants among which we ask a large representative sample of german human resource managers to choose we find that signals in both studied domains cognitive and social skills have significant effects on being invited for a job interview consistent with their relevance expectedness and credibility different signals are effective for apprenticeship applicants and college graduates while gpas and social skills are significant for both genders females are particularly rewarded for it and language skills older hr managers value school grades less and other signals more hr managers in larger firms value college grades more

determinants of commercial bank interest margins and profitability using bank level data for 80 countries in the years 1988 9s this article shows that differences in interest margins and bank profitability reflect a variety of determinants bank characteristics macroeconomic conditions explicit and implicit bank taxation deposit insurance regulation overall financial structure and underlying legal and institutional indicators a larger ratio of bank assets to gross domestic product and a lower market concentration ratio lead to lower margins and profits controlling for differences in bank activity leverage and the macroeconomic environment foreign banks have higher margins and profits than domestic banks in developing countries while the opposite holds in industrial countries also there is evidence that the corporate tax burden is fully passed onto bank customers while higher reserve requirements are not especially in developing countries

measuring household usage of financial services in recent years the number of surveys on access to and use of financial services has multiplied but little is known about whether the data generated are comparable across countries or within the same country over time a randomized experiment in ghana tested whether the identity of the respondent and the inclusion of product specific cues in questions affect reported rates of use of financial services rates of household use are almost identical whether the head reports on behalf of the household or whether the rate is tabulated from a full enumeration of household members a less complete summary of household use of financial services results when randomly selected informants nonheads of household provide the information for credit from formal institutions informal sources of savings and insurance reported use is higher when questions are asked about specific financial products rather than about the respondent s dealings with types of financial institutions in short who is asked the questions a

capital market liberalization globalization and the imf one of the most controversial aspects of globalization is capital market liberalization not so much the liberalization of rules governing foreign direct investment but those affecting short term capital flows speculative hot capital that can come into and out of a country in the 1980s and 1990s the imf and the us treasury tried to push capital market liberalization around the world encountering enormous opposition not only from developing countries but from economists who were less enamoured of the doctrines of free and unfettered markets of market fundamentalism that were at that time being preached by the international economic institutions the economic crises of the late 1990s and early years of the new millennium which were partly or even largely attributable to capital market liberalization reinforced those reservations this paper takes as its point of departure a recent imf paper to provide insights both into how the imf could have gone so wrong in its advocacy of capital market liberalization and into why capital market liberalization has so often led to increased economic instability not to economic growth copyright 2004 oxford university press

credit reporting financial intermediation and identification systems international evidence abstract credit reporting systems are an important ingredient for financial markets these systems are based upon the unique identification of borrowers which is enabled if a compulsory national identification system exists in a country we present evidence derived from difference in difference analyses on the impact of credit reporting and identification systems on financial intermediation in 172 countries between 2000 and 2008 our results suggest that the introduction of a mandatory identification system has a positive effect on financial intermediation bank credit to deposits net interest margins and financial access private credit to gdp especially in countries where there is also a credit reporting system

access to finance an unfinished agenda recent data compilations show that many poor and non poor people in many developing countries face a high degree of financial exclusion and high barriers in access to finance theory and empirical evidence point to the critical role that improved access to finance has in promoting growth and reducing income inequality an extensive literature shows the channels through which finance promotes enterprise growth and improves aggregate resource allocation there is less evidence at the household level however and on the effectiveness of policies to overcome financial exclusion the article summarizes recent efforts to measure and analyze the impact of access to finance and discusses the unfinished research agenda

the role of regulatory arbitrage in u s banks international lending flows bank level evidence this paper examines how cross border differences in the stringency of bank regulations affect u s banks international activities the analysis relies on a unique bank level dataset on the globally most active u s banks balance sheet as well as their cross border foreign affiliate lending and foreign market entry choices in 82 foreign countries in the 2003 2013 period results show that u s banks are significantly more likely to enter foreign markets with relatively laxer bank capital and disclosure requirements and exit foreign markets with relatively stricter deposit insurance schemes and more restrictions on activities banks substitute away from foreign affiliate lending via subsidiaries in the foreign country towards cross border lending originating from the u s in foreign countries with more powerful and independent bank regulators and limits on activities

banking across borders abstract the international linkages between banks play a crucial role in today s global economy existing models explain these links largely on the basis of portfolio theory in which banks diversify lending these models have found limited empirical support and do not speak to several relevant dimensions of the data they do not explain heterogeneity in the degree to which banks operate through foreign affiliates fund their activities abroad or matter for local lending in foreign countries this paper proposes a complementary theory of banking across borders that is based on elements of international trade theory in the model banking across borders arises because countries differ in their relative factor endowments and in the efficiency of their banking sectors based on these differences the pattern of foreign bank asset and liability holdings emerges endogenously this parsimonious model provides a rationale for the observed heterogeneity in foreign bank activities and is consistent with key patterns in the data

the challenge of rural financial inclusion evidence from microfinance financial inclusion is said to foster development and growth however progress in financial inclusion has been slow in rural areas where poverty is most pronounced this is often attributed to hig

mobile money financial inclusion and development a review with reference to african experience we survey literature on mobile money and its contribution in promoting financial inclusion and development with a focus on sub saharan africa we use taxonomic descriptive and analytical methods to evaluate the state of knowledge in the area we analyse how mobile technology in general may contribute to economic development and financial inclusion in theory and practise we explain the mechanics of mobile money using kenya s m pesa as a canonical example and consider whether the literature has fully established the potential economic impact of mobile money especially its contribution to financial inclusion we also consider market structure pricing and regulatory implications of mobile money we conclude by highlighting issues that require further investigation the take up of mobile money mobile money and financial inclusion substitutability between mobile money and conventional finance and regulatory structures for institutions providing mobile money services

level playing fields in international financial regulation we analyze the desirability of level playing fields in international financial regulation in general level playing fields impose the standards of the weakest regulator upon the best regulated economies however they may be desirable when capital is mobile because they counter a cherry picking effect that lowers the size and efficiency of banks in weaker economies hence while a laissez faire policy favors the better regulated economy level playing fields are good for weaker regulators we show that multinational banking mitigates the cherry picking effect and reduces the damage that a level playing field causes in the better regulated economy

is financial inclusion good for bank stability international evidence abstract financial inclusion has become an important public policy priority following the recent global financial crisis yet we know very little of how it impacts soundness of the providers of financial services using an international sample of 2635 banks in 86 countries over the period 2004 12 we find that higher level of financial inclusion contributes to greater bank stability the positive association is particularly pronounced with those banks that have higher customer deposit funding share and lower marginal costs of providing banking services and also with those that operate in countries with stronger institutional quality the results are robust to instrumental variables analysis controlling for bank fixed effects alternative measures of financial inclusion among several other robustness tests our results highlight that the importance of ensuring inclusive financial system is not only a development goal but also an issue that should be prioritised by banks as such a policy drive is good for their stability

banking services for everyone barriers to bank access and use around the world using information from 193 banks in 58 countries the authors develop and analyze indicators of physical access affordability and eligibility barriers to deposit loan and payment services they find substantial cross country variation in barriers to banking and show that in many countries these barriers can potentially exclude a significant share of the population from using banking services correlations with bank and country level variables show that bank size and the availability of physical infrastructure are the most robust predictors of barriers further the authors find evidence that in more competitive open and transparent economies and in countries with better contractual and informational frameworks banks impose lower barriers finally though foreign banks seem to charge higher fees than other banks in foreign dominated banking systems fees are lower and it is easier to open bank accounts and to apply for loans on the other hand in systems that are predominantly government owned customers pay lower fees but also face greater restrictions in terms of where to apply for loans and how long it takes to have applications processed these findings have important implications for policy reforms to broaden access

crises and capital requirements in banking we analyze a general equilibrium model in which there is both adverse selection of and moral hazard by banks the regulator can screen banks prior to giving them a licence audit them ex post to learn the success probability of their projects and impose capital adequacy requirements capital requirements combat moral hazard when the regulator has a strong screening reputation and they otherwise substitute for screening ability crises of confidence can occur only in the latter case and contrary to conventional wisdom the appropriate policy response may be to tighten capital requirements to improve the quality of surviving banks

statistical discrimination productivity and the height of immigrants building on the economic research that demonstrates a positive relationship between height and worker ability the author compares wage returns to height for immigrants and for natives to explore possible explanations for the positive wage height gradient using multiple data sets the article presents a robust empirical finding that the wage gains associated with height are almost twice as large for immigrants as for native born individuals this wage relationship occurs because the productivity gap between tall and short immigrants is greater than the productivity gap between tall and short native born workers the author next tests for the possibility that in the relative absence of other sources of information about immigrants employers place more importance on height for immigrants than for native born individuals the evidence does not support the hypothesis of statistical discrimination based on height

measuring household usage of financial services does it matter how or whom you ask in recent years the number of surveys on access to and use of financial services has multiplied but little is known about whether the data generated are comparable across countries or within the same country over time a randomized experiment in ghana tested whether the identity of the respondent and the inclusion of product specific cues in questions affect reported rates of use of financial services rates of house hold uses are almost identical whether the head reports on behalf of the household or whether the rate is tabulated from a full enumeration of household members a less complete summary of household use of financial services results when randomly selected informants provide the information for credit from formal institutions informal sources of savings and insurance reported use is higher when questions are asked about specific financial products rather than about the respondent s dealings with types of financial institutions in short who is asked the questions and how the questions are asked both matter

do microfinance institutions accomplish their mission evidence from the relationship between traditional financial sector development and microfinance institutions outreach and performance this article analyses the relationship between outreach and performance of microfinance institutions mfis on the one hand and traditional financial sector development on the other the results indicate that mfis reach more clients and are more profitable in countries where access to the traditional financial system is low this finding is in line with the market failure hypothesis mfis respond to a need that banks do not fulfill and mfis flourish where the formal financial sector fails along the same line the results demonstrate that mfis serve poorer people in countries with well developed financial systems the results suggest that in countries with well developed financial systems the two sectors stand in more direct competition with each other this competition pushes mfis down the market and makes mission drift by mfis less likely

the growing importance of social skills in the labor market the labor market increasingly rewards social skills between 1980 and 2012 jobs requiring high levels of social interaction grew by nearly 12 percentage points as a share of the u s labor force math intensive but less social jobs including many stem occupations shrank by 3 3 percentage points over the same period employment and wage growth were particularly strong for jobs requiring high levels of both math skill and social skills to understand these patterns i develop a model of team production where workers trade tasks to exploit their comparative advantage in the model social skills reduce coordination costs allowing workers to specialize and work together more efficiently the model generates predictions about sorting and the relative returns to skill across occupations which i investigate using data from the nlsy79 and the nlsy97 using a comparable set of skill measures and covariates across survey waves i find that the labor market return to social skills was much greater in the 2000s than in the mid 1980s and 1990s

the absorption of financial services in an islamic environment abstract this study examines the determinants of access to finance by firms residing in 42 islamic countries firm specific characteristics such as size sector legal status and export status are found to be robust predictors of financing constraints of firms small size firms appear to face more binding financing constraints whilst firms operating in manufacturing and focusing on exports appear to face lower constraints the auditing of accounts the location of operations and ownership structure appear significant with a varying effect on direction differences are documented on the role of firm specific characteristics between islamic and non islamic countries both the absolute and relative size of islamic bank assets is a significant predictor of firms financing constraints the results add new insights on the role of non economic institutions social and cultural factors across regions in predicting financing constraints of firms in islamic countries effective financial inclusion reform must focus on small size introverted and services oriented firms operating in some distance from the center as well as understand the divergent role of institutions social structures and culture within the islamic world

financial literacy information flows and caste affiliation empirical evidence from india abstract this paper empirically investigates the relevance of social interaction and caste affiliation for individual awareness of financial instruments and investment behavior of households in india the results of our empirical analysis which is based on a large scale survey on saving patterns of indians suggest a positive relationship between financial literacy and social interaction however especially backward caste people living in regions with a large fraction of backward castes have a lower probability of being aware of various financial instruments in contrast we find only weak empirical evidence for a direct effect of caste affiliation and social interaction on investment behavior