This paper outlines an analytical framework for estimating households' access to formal credit across European transition economies shortly after the onset of the global financial…
Abstract
Purpose
This paper outlines an analytical framework for estimating households' access to formal credit across European transition economies shortly after the onset of the global financial crisis. This study, along with the individual-level socio-economic and demographic characteristics also considers the perceived quality of the institutions. The author wants to assess whether an adequate policy-level intervention to promote financial inclusion should account for the individuals' subjective evaluation of the political situation in their own country as well as their personal experience of corruption.
Design/methodology/approach
This paper identifies the main determinants of financial inclusion using European microdata (Life in Transition Survey II, LiTS II). In order to estimate individuals' access to formal financial markets, the author constructs a bivariate probit model to account for joint access to short-term and long-term credit products (Mohieldin and Wright, 2000).
Findings
The results show that improving people's access to financial markets across European regions requires a set of interventions at the institutional and local levels to link-up policies of financial inclusion and financial integrity.
Originality/value
The paper contributes to the existing literature by identifying a number of key causes of financial inclusion and the role of institutional (corruption crimes) factors in determining the levels of financial access in a country.
Details
Keywords
This paper extends a recent study on financial dollarization of Broda and Levy Yeyati (2003) by introducing a lending of last resort intervention contingent both on banks’…
Abstract
This paper extends a recent study on financial dollarization of Broda and Levy Yeyati (2003) by introducing a lending of last resort intervention contingent both on banks’ portfolio currency composition and on banks’ monitoring effort. We show that when the lender of last resort commitment to intervene is matched with some operational discretion, according to a “constructive ambiguity” approach, then the provision of emergency liquidity may be crucial to enable distressed, but well-behaved banks, to survive and finance “high quality” investment projects.
The paper aims at developing a theoretical model for de facto dollarized small open economies focusing on currency substitution and nominal wages indexation to the exchange rate.
Abstract
Purpose
The paper aims at developing a theoretical model for de facto dollarized small open economies focusing on currency substitution and nominal wages indexation to the exchange rate.
Design/methodology/approach
The analysis is performed in a general equilibrium “New Open Economy Macroeconomics” framework with nominal rigidities and imperfect competition in the nontraded good sector.
Findings
The paper finds that a dollar‐indexed economy with low degrees of payments/financial dollarization could experience higher costs in terms of exchange rate and output fluctuations when nominal shocks dominate real shocks, making stabilization programs more difficult to achieve in a rapid and less costly way.
Practical implications
The speed of adjustment of macro variables is faster in the highly dollarized economy as a response to a higher and more volatile inflation rate. A higher level of financial dollarization increases the frequency of domestic prices and wages revisions to nominal exchange rate shocks. This might explain, in turn, why nominal disturbances are shorter lived in the higher dollarized economies, and the asymmetry between financial and real dollarization
Originality/value
Contrary to the “conventional wisdom” that predicts a positive relationship between the degrees of dollarization and the exchange rate pass‐through, our model shows that the degree of dollarization and the degree of dollar indexation are not necessarily the same or even correlated.
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Harvey Arbeláez and Reid William Click
This book is an attempt to reflect on what we have learned from financial policies and financial crises in Latin America. The 21 chapters in this volume capture the developments…
Abstract
This book is an attempt to reflect on what we have learned from financial policies and financial crises in Latin America. The 21 chapters in this volume capture the developments in various ways. They cover theoretical contributions, regional empirical studies, and specific inquiries on Argentina, Brazil, Chile, Colombia, Cuba, Ecuador, Mexico, Peru and Venezuela. The breadth of methodologies implemented suggests that researchers are looking at Latin American financial markets through a variety of lenses. The chapters are divided into 7 parts, including, in Part I, an initial overview. Part II examines the foreign exchange markets in Latin America and their interactions with other markets. Part III discusses dollarization issues in the region. Part IV then takes up the issue of banking in Latin America. Equity and bond markets are considered in Parts V and VI, respectively. Lastly, Part VII considers pension systems in Latin America. Taken as a whole, the 21 chapters seize the excitement of studying Latin America and provide lessons that are applicable around the world.
Germana Giombini, Francesca Grassetti and Edgar Sanchez Carrera
The authors analyse a growth model to explain how economic fluctuations are primarily driven by productive capacities (i.e. capacity utilization driven by innovations and…
Abstract
Purpose
The authors analyse a growth model to explain how economic fluctuations are primarily driven by productive capacities (i.e. capacity utilization driven by innovations and know-how) and productive inefficiencies.
Design/methodology/approach
This study’s methodology consists of the combination of the economic growth model, à la Solow–Swan, with a sigmoidal production function (in capital), which may explain growth, poverty traps or fluctuations depending on the relative levels of inefficiencies, productive capacities or lack of know-how.
Findings
The authors show that economies may experience economic growth, poverty traps and/or fluctuations (i.e. cycles). Economic growth is reached when an economy experiences both a low level of inefficiencies and a high level of productive capacities while an economy falls into a poverty trap when there is a high level of inefficiencies in production. Instead, the economy gets in cycles when there is a large level of the lack of know-how and low levels of productive capacity.
Originality/value
The authors conclude that more capital per capita (greater savings and investment) and greater productive capacity (with less lack of know-how) are the economic policy keys for an economy being on the path of sustained economic growth.