Financial intermediation analysis from financial flows

2019 ◽  
Vol 46 (3) ◽  
pp. 727-747
Author(s):  
Claudio Oliveira De Moraes ◽  
José Americo Pereira Antunes ◽  
Adriano Rodrigues
Keyword(s):  
Financial Stability ◽  
Financial Intermediation ◽  
Dynamic Panel Data ◽  
Financial Friction ◽  
Financial Flows ◽  
Content Type ◽  
Crisis Period ◽  
Data Framework ◽  
Time Frames

Purpose The purpose of this paper is to analyze the financial friction effect of non-performing loans (NPLs) on financial intermediation (FI) through empirical evidence from the Brazilian experience. Design/methodology/approach The authors develop a new variable, financial intermediation flow and a new indicator, FI, both measures of FI. To empirically test FI, the authors use a dynamic panel data framework that draws on 101 banks (December 2000 to December 2015). Findings An increase in NPL reduces FI. Thus, NPL amplifies financial friction in FI. This result holds in different time frames, such as the pre-crisis period, the crisis period and the post-crisis period. Practical implications The FI measure developed in this study offers the policymakers a possibility to monitor financial stability. Originality/value This study adds to this debate by proposing a measure of FI derived from financial flows. This measure allows one to estimate the role of NPL as a financial friction that can pose a threat to financial stability.

Managers ability and investment dynamics during the global financial crisis: an emerging market context

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Rehana Naheed ◽  
Bushra Sarwar ◽  
Rukhsana Naheed
Keyword(s):  
Global Financial Crisis ◽  
Stock Exchange ◽  
Emerging Market ◽  
Investment Policy ◽  
Managerial Ability ◽  
Content Type ◽  
Crisis Period ◽  
Managerial Talent ◽  
The Impact

Purpose Many scholars have developed several theories and empirics to study issues related to investment policy. However, there are still some unexplored issues in the field of finance that require further analysis and investigation, particularly in the corporate governance literature such as the role of managerial talent in the firms. This study investigated the impact of managerial ability on investment decisions of the firms. Design/methodology/approach The study first uses firm efficiency and managerial ability by using data envelope analysis (DEA) proposed by Demerjian, Lev and McVay, 2012. Data is collected for the firms listed in Shenzhen and Shanghai stock exchange for an emerging market of China during the crisis period with 1,640 number of observations. Findings The study reveals that the presence of more managerial talent in a firm is significant for the strategic decisions of the firms. Findings follow a resource-based view and identify that more talented managers help the firms in the acquisition of resources specifically during financial distress. The study subdivides the firms based on: ownership structures and financial constraints. Results generated from propensity score matching imply that the role of high-talented managers is significantly different from that of low-talented managers. Originality/value The study reveals managerial ability as a determinant of investment policy. To the researchers’ best knowledge, none of the previous studies have been conducted in emerging market literature during the crisis period.

Collective action among rural poor

2019 ◽  
Vol 37 (1) ◽  
pp. 20-43
Author(s):  
George Okello Candiya Bongomin ◽  
John C. Munene ◽  
Joseph Mpeera Ntayi ◽  
Charles Akol Malinga
Keyword(s):  
Collective Action ◽  
Financial Institutions ◽  
Financial Intermediation ◽  
Financial Inclusion ◽  
Content Type ◽  
Mediating Role ◽  
The Poor ◽  
Bootstrap Approach ◽  
The Relationship

PurposeThe purpose of this paper is to establish the mediating role of collective action in the relationship between financial intermediation and financial inclusion of the poor in rural Uganda.Design/methodology/approachThe paper uses structural equation modeling (SEM) through bootstrap approach constructed using analysis of moment structures to test for the mediating role of collective action in the relationship between financial intermediation and financial inclusion of the poor in rural Uganda. Besides, the paper adopts Baron and Kenny’s (1986) approach to establish whether conditions for mediation by collective action exist.FindingsThe results revealed that collective action significantly mediates the relationship between financial intermediation and financial inclusion of the poor in rural Uganda. The findings further indicated that the mediated model had better model fit indices than the non-mediated model under SEM bootstrap. Furthermore, the results showed that both collective action and financial intermediation have significant and direct impacts on financial inclusion of the poor in rural Uganda. Therefore, the findings suggest that the presence of collective action boost financial intermediation for improved financial inclusion of the poor in rural Uganda.Research limitations/implicationsThe study used quantitative data collected through cross-sectional research design. Further studies through the use of interviews could be adopted in future. Methodologically, the study adopted use of SEM bootstrap approach to establish the mediating effect of collective action. However, it ignored the Sobel’s test and MedGraph methods. Future studies could adopt the use of alternative methods of Sobel’s test and MedGraph. Additionally, the study focused only on semi-formal financial institutions. Hence, further studies may consider the use of data collected from formal and informal institutions.Practical implicationsPolicy makers and managers of financial institutions should consider the role of collective action in promoting economic development, especially in developing countries. They should create structures and design financial services and products that promote collective action among the poor in rural Uganda.Originality/valueAlthough several scholars have articulated financial inclusion based on both the supply and demand side factors, this is the first study to test the mediating role of collective action in the relationship between financial intermediation and financial inclusion of the poor in rural Uganda using SEM bootstrap approach. Theoretically, the study combines the role of collective action with financial intermediation to promote financial inclusion. Financial intermediation theory ignores the role played by collective action in the intermediation process between the surplus and deficit units.

Optimism-pessimism effects on money demand: theory and evidence

2019 ◽  
Vol 11 (1) ◽  
pp. 23-35
Author(s):  
Christos Karpetis ◽  
Stephanos Papadamou ◽  
Eleftherios Spyromitros ◽  
Erotokritos Varelas
Keyword(s):  
Money Demand ◽  
Content Type ◽  
Real Money ◽  
Consumption Expenditures ◽  
Data Framework ◽  
Recent Financial Crisis ◽  
Demand Sensitivity ◽  
Demand Changes ◽  
The Relationship

Purpose The purpose of this paper is to investigate, both theoretically and empirically, the relationship between optimism (pessimism) – as reflected by animal spirits – and money demand by taking into account transaction costs. Design/methodology/approach Inspired by the theoretical model of money demand by Teles et al. (2016) the authors incorporate the optimism (pessimism) effects in the money demand. Then, using the consumers’ confidence indicator as a proxy indicator of optimism/pessimism, they estimate the money demand in a panel data framework. Findings The theoretical framework suggests that the optimism (pessimism) effects on money demand are positive (negative). Empirical evidence for 11 Eurozone countries divided in two groups (i.e. core and periphery) confirms the theoretical considerations. Practical implications It appears that periphery countries with a higher sensitivity to the recent financial crisis present lower real money demand sensitivity to consumption expenditures and higher real money demand sensitivity to consumer confidence index. Moreover, in such countries, money demand changes present higher persistence over time. Thus, the authors observe differing attitudes concerning money demand across Eurozone citizens that should be taken into account by monetary policymakers (i.e. the ECB). Originality/value The authors introduce, in the vast literature on money demand, both theoretically and empirically the role of optimism (pessimism). Differences across core and periphery Eurozone countries identified.

Services traded for intermediate and final usage

2018 ◽  
Vol 45 (3) ◽  
pp. 459-497 ◽  
Author(s):  
Deeparghya Mukherjee
Keyword(s):  
Financial Intermediation ◽  
Retail Trade ◽  
Trade Restrictions ◽  
Business Services ◽  
Services Trade ◽  
Content Type ◽  
Final Consumption ◽  
Service Sectors ◽  
And Storage

Purpose The purpose of this paper is to investigate and assess the trends of bilateral services trade in the world segmented by trade for final consumption and intermediate usage across several service sectors. The differential trends, if any, are studied while examining the role of free trade agreements which have a chapter on services trade as well as the role of services trade restrictions. The study unravels differences across service sectors in this respect. Design/methodology/approach The author uses an augmented gravity model to address the above using OECD- World Trade Organization (WTO) TiVA data for bilateral trade in intermediates and final products (October 2015 release) and World Bank Services Trade Restrictions Index (STRI). The poisson pseudo maximum likelihood estimation technique is used in light of the structure of the data. Trade creating and diverting effects are identified controlling for time and country-time specific effects. The following sectors are specifically looked at: total business sector services, computer and related services, financial intermediation, post and telecommunication, transport and storage, R&D and other business services, hotels and restaurants, construction, and wholesale and retail trade. Findings First, services free trade agreements (FTAs) have had a trade creating impact with no trade diverting impact for services trade in aggregate with stronger effects on services traded for intermediate usage. Second, financial intermediation and post and telecommunication have been left unaffected by services FTAs. While no trade diversion is concluded for any sector, R&D and other business services, transport and storage and wholesale retail trade show maximum trade creation effects in response to FTAs. Third, trade restrictions of mainly OECD countries are responsible for lowering exports for most sectors. Finally, in terms of policy implications, at a general level, the author does not find a significant difference in the author’s results for services traded for intermediate usage or final consumption except for a stronger effect of FTAs on intermediate services trade. Hence, the policies to foster services trade on both counts are concluded to be the same and deal with behind-the-border policies of domestic industrial policy reforms like national treatment of foreign firms, licensing requirements, FDI policies, etc. Research limitations/implications Statistics for services trade are limited. The data are only available for the years 1995, 2000, 2005, 2008, 2009, 2010 and 2011. Additionally, the conclusions on services trade restrictions are based on statistics for 2011 alone, since this is the only year for which the statistics are available. A complete time series for the entire sample period would increase robustness of the study with a better time variant version of the trade restrictiveness variable. Finally, in the construction of the OECD-WTO-TiVA database of a world IO table, there may have been approximations in constructing statistics for services traded for intermediate usage and final consumption. The results remain sensitive to the same but this is the best possible statistics available for the purposes. Originality/value This is the first study which looks at services trade segmented by trade for final consumption and intermediate usage taking advantage of the available data for a number of service sectors. The role of restrictions is also studied for the first time segmented by trade in intermediates and final consumption. The stronger effects of FTAs on intermediate services trade as well as financial intermediation and post and telecommunication services being insulated from effects of FTAs are important findings, especially since services are mainly thought to be traded for final consumption. Similar trends of results for services traded for intermediate usage and final consumption and restrictions affecting exports from exporter countries and imports by importer countries highlight the importance of behind-the-border domestic policies in facilitating or inhibiting services trade on both counts and more importantly for intermediate usage which, in turn, would improve goods tradability.

The role of tourism in island economic growth and resilience

2019 ◽  
Vol 46 (7) ◽  
pp. 1418-1436 ◽  
Author(s):  
Fabio Mazzola ◽  
Pietro Pizzuto ◽  
Giovanni Ruggieri
Keyword(s):  
Design Methodology ◽  
Dynamic Panel Data ◽  
Tourism Demand ◽  
Economic Resilience ◽  
Dynamic Panel ◽  
Content Type ◽  
Tourism Sector ◽  
The Mediterranean Basin ◽  
Growth Hypothesis

Purpose The purpose of this paper is to verifying the economic resilience of islands and, in particular, the role of the tourism sector in the reaction to the most recent economic crisis. The analysis concerns insular contexts, such as the greater island regions in the Mediterranean basin. Design/methodology/approach Static and dynamic panel data techniques are used for a sample of 13 island economies over a period of 16 years. Findings Results show that the growth factors for regional islands are similar to the ones usually considered for other regions, but the tourism-led growth hypothesis is highly supported. Tourism demand more than supply plays a role together with accessibility. The crisis has reduced the importance of tourism supply, while tourism demand and accessibility have remained crucial for growth together with other traditional engines of growth. Originality/value To the best of authors’ knowledge, none of the current works has considered territorial determinants and tourism indicators inside the same framework analyzing growth in island economies by considering the changes occurred during the crisis explicitly.

scholarly journals From cash to central bank digital currencies and cryptocurrencies: a balancing act between modernity and monetary stability

2020 ◽  
Vol 47 (4) ◽  
pp. 911-938 ◽  
Author(s):  
Ansgar Belke ◽  
Edoardo Beretta
Keyword(s):  
Central Bank ◽  
Financial Stability ◽  
Service Providers ◽  
Central Banks ◽  
Payment Systems ◽  
Content Type ◽  
Paper Money ◽  
Payment Instruments ◽  
Tier System

PurposeThe paper explores the precarious balance between modernizing monetary systems by means of digital currencies (either issued by the central bank itself or independently) and safeguarding financial stability as also ensured by tangible payment (and saving) instruments like paper money.Design/methodology/approachWhich aspects of modern payment systems could contribute to improve the way of functioning of today's globalized economy? And, which might even threaten the above-mentioned instable equilibrium? This survey paper aims, precisely, at giving some preliminary answers to a complex – therefore, ongoing – debate at scientific as well as banking and political levels.FindingsThe coexistence of State's money (i.e. “legal tender”) and cryptocurrencies can have a disciplining effect on central banks. Nevertheless, there are still high risks connected to the introduction of central bank digital currency, which should be by far not considered to be a perfect substitute of current cash. At the same time, cryptocurrencies issued by central banks might be exposed to the drawbacks of cryptocurrencies without benefiting from correspondingly strong advantages. A well-governed two-tier system to be achieved through innovation in payment infrastructures might be, in turn, more preferable. Regulated competition by new players combined with “traditional” deposits and central bank elements remains essential, although central banks should embrace the technologies underlying cryptocurrencies, because risk payment service providers could move to other currency areas considered to be more appealing for buyers and sellers.Research limitations/implicationsWe do not see specific limitations besides the fact that the following is for sure a broad field of scientific research to be covered, which is at the same time at the origin of ongoing developments and findings. Originality and implications of the paper are, instead, not only represented by its conclusions (which highlight the role of traditional payment instruments and stress why the concept of “money” still has to have specific features) but also by its approach of recent literature's review combined with equally strong logical-analytical insights.Practical implicationsIn the light of these considerations, even the role of traditional payment systems like paper money is by far not outdated or cannot be – at this point, at least – replaced by central bank digital currencies (whose features based on dematerialization despite being issued and guaranteed by a public authority are very different).Social implicationsNo matter which form it might assume is what differentiates economic from barter transactions. This conclusion is by far not tautological or self-evident since the notion of money has historically been a great object of scientific discussion. In the light of increasingly modern payment instruments, there is no question that money and the effectiveness of related monetary policies have to be also explored from a social perspective according to different monetary scenarios, ranging from central bank digital currencies to private currencies and cash restrictions/abolition.Originality/valueThe originality/value of the following article is represented by the fact that it (1) refers to some of the most relevant and recent contributions to this research field, (2) moves from payment systems in general to their newest trends like cryptocurrencies, cash restrictions (or, even, abolition proposals) and monetary policy while (3) combining all elements to reach a common picture. The paper aims at being a comprehensive contribution dealing with "money" in its broadest but also newest sense.

Does higher educational attainment imply less crime? Evidence from the Indian states

2020 ◽  
Vol 48 (1) ◽  
pp. 133-165
Author(s):  
Bijoy Rakshit ◽  
Yadawananda Neog
Keyword(s):  
Educational Attainment ◽  
Tertiary Education ◽  
Dynamic Panel Data ◽  
Crime Rates ◽  
Economic Crime ◽  
Dynamic Panel ◽  
Indian States ◽  
Content Type ◽  
The Impact

PurposeThe primary purpose of this paper is to empirically investigate the impact of educational attainment on crime rates across 33 Indian states over the period 2001 to 2013. This paper also examines the role of various macroeconomic, socio-economic and demographic factors in determining the variation of crimes in India.Design/methodology/approachFirst, this paper provides a representative theoretical model and discusses the possible relationship between crime and education. Second, the paper applies a dynamic panel data (DPD) model to extract more precise, unbiased and reliable estimates of the effect of education in abating different crime rates. The main advantage of using the dynamic panel model is to address the problem of endogeneity in some regressors and capture the time persistent effect of education on crime.FindingsEmpirical findings reveal that a 1% increase in gross enrolment ratio leads to the reduction of total crime by 8%. However, a unique finding identifies a positive association between tertiary education and economic crime. This finding further goes against the general belief that criminals tend to be less educated than non-criminals.Practical implicationsThis paper recommends that instead of punishment and mandatory law enforcement for offenders, increase in government expenditure and different educational attainment ratios can go a long way to combat crime in India, which has posed a serious threat to the stability of society. Furthermore, utilizing the information on offenders' educational attainment in examining the crime rates can be a future research agenda for policymakers.Originality/valueThis study contributes to the empirical debate of ‘crime-education nexus’ by examining the role of education on crime in India. This study is the first of its kind that focuses on the aspects of crime and education more recently and investigates the relationship between crime and education due to the recent changes in educational attainment ratios and crime rate.

Exploring the mediating role of social capital in the relationship between financial intermediation and financial inclusion in rural Uganda

2018 ◽  
Vol 45 (5) ◽  
pp. 829-847 ◽  
Author(s):  
George Okello Candiya Bongomin ◽  
John C. Munene ◽  
Joseph Mpeera Ntayi ◽  
Charles Akol Malinga
Keyword(s):  
Social Capital ◽  
Research Design ◽  
Financial Intermediation ◽  
Financial Inclusion ◽  
Cross Sectional ◽  
Content Type ◽  
Mediating Role ◽  
The Poor ◽  
The Relationship

Purpose The purpose of this paper is to establish the mediating role of social capital in the relationship between financial intermediation and financial inclusion in rural Uganda. Design/methodology/approach The current study used cross-sectional research design and a semi-structured questionnaire was used to collect data for this study. The study applied structural equation modeling through bootstrap approach in AMOS to establish the mediating role of social capital in the relationship between financial intermediation and financial inclusion. Findings The results indicated that social capital significantly mediates the relationship between financial intermediation and financial inclusion in rural Uganda. Therefore, it can be deduced that social capital among the poor play an important role in promoting financial intermediation for improved financial inclusion in rural Uganda. Research limitations/implications Although the sample was large, it may not be generalized to other segments of the population. Data were collected from only poor households located in rural Uganda. Besides, the study was cross-sectional, thus, limiting efforts in investigating certain characteristics of the sample over time. Perhaps future studies could adopt the use of longitudinal research design. Practical implications Financial institutions such as banks should rely on social capital as a substitute for physical collateral in order to promote financial inclusion, especially among the poor in rural Uganda. Originality/value This study provides empirical evidence on phenomenon not studied in rural areas in Sub-Saharan Africa where the poor use social capital embedded in customs and norms for doing business. The results highlight the importance of social capital in mediating the relationship between financial intermediation and financial inclusion of the poor in rural Uganda.

Macro and micro financial liberalizations, savings and growth

2018 ◽  
Vol 10 (2) ◽  
pp. 290-309 ◽  
Author(s):  
Gonçalo Pina
Keyword(s):  
Financial Crises ◽  
Financial Stability ◽  
Capital Accumulation ◽  
Financial Sector ◽  
Financial Contracts ◽  
Content Type ◽  
Growth Effects ◽  
Savings Rate ◽  
Domestic Savings

Purpose This paper aims to empirically and theoretically study the role of domestic savings behind the financial stability and growth effects of different financial liberalizations, when the government is not able to commit to enforce financial contracts. The following liberalizations are considered. Macro financial liberalizations target capital flow and interest rate liberalization, whereas micro financial liberalizations target competition in the financial sector. Simultaneous liberalizations target both micro and macro dimensions. Design/methodology/approach This study theoretically solves a new simple model of different types of financial liberalizations, micro, macro and simultaneous. The focus is on the crisis and growth effects of countries liberalizing only macro dimensions of financial policy, relative to both micro and macro dimensions together, and on how the level of savings determines these effects. The study empirically uses data on macro and micro financial liberalizations for 91 countries between 1973 and 2005 to provide a taxonomy of liberalization strategies, and empirically tests whether domestic savings are related to the success of different strategies. Capital accumulation, investment profile and the frequency of financial crises are also evaluated. Findings The findings show that, empirically, simultaneous liberalizations are associated with larger growth only if the savings rate is large. If the savings rate is low, growth is larger when liberalizations target macro dimensions. Capital accumulation increases more with macro liberalizations under low savings and simultaneous liberalizations with high savings. Simultaneous liberalizations with low savings increase risks related to contract viability and expropriation, profits repatriation and payment delays. Simultaneous liberalizations with high savings are associated with smaller probabilities of financial crises. These observations are consistent with the theoretical model, where reduced competition in the financial sector can improve financial stability and reduce financial crises when savings are low. Originality/value The contribution of this paper, relative to the vast literature on financial liberalizations, is to document how savings determine the crisis and growth effects of macro and micro liberalizations. It provides and tests empirically a new channel for the role of savings when governments cannot commit to enforce financial contracts. This is informative for policymakers and policy institutions facing different strategies of financial liberalizations.

Diffusion of crisis signals across the world: evidence from subprime crisis of 2008-2009

2018 ◽  
Vol 13 (2) ◽  
pp. 410-430 ◽  
Author(s):  
Sruthi Rajan ◽  
Shijin Santhakumar
Keyword(s):  
Ordinary Least Squares ◽  
Stock Index ◽  
Subprime Crisis ◽  
Policy Makers ◽  
Content Type ◽  
Crisis Period ◽  
Economic Fundamentals ◽  
The World ◽  
The Impact

Purpose The innovations in fundamentals coupled with noise traders induce co-movement in diverse markets. This co-movement in equity markets which is evidenced higher during the turmoil period influences economic fundamentals of a country dissimilar in nature. The purpose of this paper is to examine whether economic fundamentals or investors’ behavior attributable to disturbances across the world are the rationale behind the crisis transmission, and thereby distinguish fundamental-based contagion from investor-induced contagion. Design/methodology/approach Initially, the study investigates the role of macroeconomic fundamentals and stock returns on crisis occurrence using panel probit estimates. Additionally, ordinary least squares estimates controlling the influence of fundamentals on domestic return capture the discrete country effect measuring the influence of domestic as well as foreign economic fundamentals along with foreign returns on the domestic stock index. Findings The empirical results reveal that foreign country stock index returns are having a significant influence on domestic returns besides a prominent role in crisis occurrence. The binary probit model confirmed the influence of both macroeconomic factors and foreign returns in crisis occurrence. The OLS estimates found evidence for investor-induced contagion in the crisis period where the effects of economic fundamentals are small in comparison to foreign market returns that are mainly dominant in pre- and post-crisis period. Research limitations/implications The propagation of crisis from one market to other would enable the policy makers to make clear regulations at right time to control for the crisis in future. The results can help the policy makers as well as investors in reducing the impact of the crisis in future by clearly monitoring the behavior of the factors under study. Originality/value The current study addresses the role of macro fundamentals and investors influence in crisis propagation. Adopting subprime crisis of 2008-2009 as a reference point and separating the sample period into pre-crisis, crisis and post-crisis period, the study explains how badly the other 30 markets impacted the crisis that emerged in the USA.

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