Financial Sector Development

The paper examines the impact of interest rates on investment in Nigeria from 1986 to 2018, using co-integration and vector error correction approach. The specific objectives were to estimate the short-and long-run elasticities as well as the error correction mechanism of interest rate, inflation rate and exchange rate on investment in Nigeria. The outcome of the exercise validated the hypothesis that interest rate has impact on investment in Nigeria, albeit with mixed results as the first lag period of all the three indicators used indicated positive relationship with the growth of investment but the lag of the second period all indicated negative impact on investment. The error-correction equation of investment indicates a feedback of 53.1 per cent, of the first period lag but 47.1 per cent, of second period lag. Also, the error-correction term indicated low speed of adjustment with only 2.0 per cent.

All of Zambia's pension schemes are deficient in design, financing, and administration. This report urges that Zambia restructure its social protection system to complement its new economic strategy. That restructuring must address such basic problems as macroeconomic fluctuations and an unstable financial sector; high inflation rates and politically-motivated low-yield investments and loans; income ceilings irregularly adjusted for inflation; overgenerous public sector pension benefits; and inadequate management of pension fund operations. In the short and medium term, the objectives should be to settle outstanding pension claims, revise early retirement provisions and investment policies, and improve capabilities for administering statutory pension funds. In the long term the objectives should be to convert the Zambia National Provident Fund (ZNPF) into a modest basic pension scheme for private sector employees, and subsequently integrate civil servants and public sector empl...

What are the relative advantages and disadvantages of bank-based financial systems (as in Germany and Japan) and market-based financial systems (as in England and the United States). Does financial structure matter? In bank-based systems banks play a leading role in mobilizing savings, allocating capital, overseeing the investment decisions of corporate managers, and providing risk management vehicles. In market-based systems securities

This chapter provides a conceptual basis for the price discovery potential for tradable market instruments and specifically the development of mortgage securitization in Asia. We argue that securitization in Asia may be potentially important because it may help bring transparency to the financial sector of Asian economies. We put forth a model explaining how misaligned incentives can lead to bank-generated real estate crashes and macroeconomic instability. We provide new comparative data on the banking sector's ...

1 904143 00 8 Colin Kirkpatrick Maggie Curran, Marketing and Publicity Administrator Institute for Development Policy and Management, University of Manchester, Crawford House, Precinct Centre, Oxford Road, MANCHESTER M13 9GH Tel: +44-161 275 2804/2800 Fax: ...

Botswana is a diamond dependent fast growing country in Southern Africa. Even though foreign aid supported the annual budgets of Botswana till the late 1980s, after the successful establishment of diamond mining, the country began to wean itself away from foreign aid. After experiencing robust growth for nearly 3 decades, the momentum of growth began to decelerate by the turn of the century. With the reigning in of the global recession, diamond incomes began to fall, economic growth recorded negative rates and budget surpluses began to turn deficit. Dependence on foreign debt increased, though indebtedness was well within the sustainable limit. Though the country soon recovered from the shocks of recession, it still suffers from other illnesses such as slow pace of economic growth, stagnation in economic diversification process, fall in diamond revenues, increased dependence on imports of essential commodities, worsening exchange rates etc. In this context, it has become necessary to look at the causality between external debt and economic growth in the short and long run and its implications thereof. The attempt to ascertain the causality based on a VAR model shows that in the long run, the debt level can pose a threat to the economic security of the country by worsening growth rates and increasing dependence on more foreign aid. In the short run, as indicated by the Granger causality test, economic growth does not influence external debt in the reverse direction. But the impulse response function indicates that there is two way causality between the two variables in the long run.

Existing studies of Hong Kong’s and Singapore’s success as leading Asian international financial centers (IFCs) have largely focused on economic structural factors at the neglect of politicaleconomic contextual variables. Taking a policy subsystems approach and based on extensive field research, this article attempts to address this shortcoming by conceptualizing the “policy relations” that exist between state, industry, and other non-state actors in the two IFCs and
delineating the “division of policy roles” among these actors. In the process, this article contributes toward the existing IFC literature and conceptualizes the sociopolitical relations that exist among financial sector actors.

This study investigates fiscal policy impact on financial sector development in Sierra Leone between 1980 and 2015. The objective of the study is to establish the long run relationship between fiscal policy variable and financial sector development. The study used a quantitative approach; the model was formulated with Private sector credit used as a proxy variable for financial sector development. This was regressed against gross domestic product, money supply, real interest rates, inflation and total tax revenue. The study used error correction model to estimate both long term and short term effects of the explanatory variables on the dependent variables in the empirical functions. The unit root tests shows that variables in the equations were I(1) variables, meaning they were stationed at first difference using both the Augmented Dickey Fuller and Philip Pheron tests. The Johansson co integration tests concludes that there are more than one co-integrating factors in each empirical function, therefore a long run relationship exists between private sector credit and its explanatory variables. To validate the quality of the data for the use of vector auto regression, all of the tests were conducted including; lag length criteria test, serial correlation test, normality test, stability test. The result from the private sector credit and fiscal and non-fiscal variables in Sierra Leone contradicts most of the theoretical and empirical literature on financial sector development. The conclusion is that even when we are expecting a negative relationship between private sector credit and money supply, real interest rates, total tax revenue and inflation, the results all came out positively and significantly in long run financial economic analysis. This study shows that the private sector is willing to borrow regardless of the interest rate in the economy and the level of taxation. Basically the risk appetite in the private sector shows the level of desperation of private institution to access short to medium term capital. This might explain the reason for the high non-performing loans (NPL) in the economy of Sierra Leone.

The history of minimum wages in Kenya dates back to 1932. Enforcement of Minimum wages in kenya has been low in the past years. The study aimed at assessing the effectiveness of minimum wage enforcement mechanism in Kenya. Kaitz ratio and the labour inspectorate staff employment ratio were used to assess the effectiveness of minimum wage enforcement mechanism in Kenya. As at 2014, the Kenyan labour inspectorate staff-employment ratio was 155,435 implying ineffectiveness of minimum wage enforcement mechanism. The study found an average kaitz ratio of 0.48 between 1996 and 2014, implying that minimum wage was on average 48 per cent of the average wage in the agricultural and general sectors. Therefore, there is  need for the government to enhance effective enforcement of minimum wage regulations through digitization of labour inspection

Workers'remittances to developing countries have become the second largest type of flows after foreign direct investment. The authors use data on workers'remittance flows to 99 developing countries from 1975-2003 to study the impact of remittances on financial sector development. In particular, they examine whether remittances contribute to increasing the aggregate level of deposits and credit intermediated by the local banking

Finance-growth nexus is one of the main issues in the major economies of the world.This study aimed at examining effects of financial development on economic growth in Ethiopia using annual time series data from 1980 to 2019. Stationary tests were conducted using the Augmented Dicker Fuller (ADF) test statistic. The Autoregressive Distributed Lag (ARDL) and Bounds test for co-integration was conducted. The Granger Causality technique was employed. The findings reveal that financial sector development causes economic growth. Inflation had a negative impact on economic growth in line with a priori expectation.Credit to private sector and savings had a positive impact on economic growth. It is recommended that monetary policy makers ensure all stakeholders adhere strictly to laid down goals to guarantee financial development. Government should implement policies that promote financial sector development which will result in investment and economic growth.
Key Words: ADF, ARDL,Financial Development, Granger Causality, Time Series.

This paper examines the relationship between Nigeria financial sector development and macroeconomic stability from 1980 – 2014. The objective is to investigate the extent and the direction of relationship between various components of financial sector development and macroeconomic stability in Nigeria. Time series data were sourced from Central Bank of Nigeria (CBN) statistical bulletin. The study modeled percentage of Nigerian Gross Domestic Product to Balance of Payment (GDP/EXT) as our dependent variable total commercial banks credit to Gross Domestic Product (TCBC/GDP), Broad Money Supply to Gross Domestic Product (M2/GDP), Credit to Core Private Sector to Gross Domestic Product (CPS/GDP), Stock Market Capitalization to Gross Domestic Product (MKT/GDP) and Total savings to Gross Domestic Product (TS/GDP) as our independent variables. The study employed Co-integration Test, Augmented Dickey Fuller Unit Root Test, Granger Causality Test and Vector Error Correction Model were used to examine the extent to which the independent variables affect dependent variable. The static regression result shows that all the independent variables have positive effect on the dependent variables. The Augmented Dickey Fuller result shows non stationarity at level and stationarity at first difference. The cointegration result shows long run relationship, the Granger Causality Test shows multivariate relationship running through the independent to the dependent variable and the dependent to the independent variables. The vector error correction result shows adequate speed of adjustment to equilibrium. The study conclude that Nigerian financial sector development have significant relationship with macroeconomic stability. It therefore recommends effective financial system policies to deepen the development of the financial system to enhance Nigerian macroeconomic stability.

This study re-estimated the links between foreign direct investment (FDI) and economic growth by including the development of the domestic financial sector in Ghana. The simple dynamic ordinary least squares regression was used to analyze how financial sector development in Ghana contributes in attracting FDI to promote economic growth. It was found out that improvement in financial sector in Ghana leads to more inflows of foreign direct investment. The FDI with the interaction term and financial sector development has a significant positive impact on current real gross domestic product. This implied that FDI works through the domestic financial sector to affect the economic performance of the Ghanaian economy positively. Thus, the financial sector development is a key for FDI inflows to impact positively on the economic performance of the Ghanaian economy. The Granger causality test also showed that there is unidirectional causality from real gross domestic product to FDI, financia...

This study improves the African Regional Integration Index (ARII) proposed by the African Union, the African Development Bank and the United Nations Economic Commission for Africa by providing a theoretical framework and addressing shortcomings related to weighting and aggregation of the indicator. This paper measures monetary integration in the eight African Regional Economic Communities (RECs) by constructing an Index of African Monetary Integration (IAMI). It proposes an Optimal Currency Area as theoretical framework and uses a panel approach to appreciate the dynamics of the index over different periods of time. The findings show that: (i) inflation and finance (trade and mobility) present the highest (lowest) score while ECOWAS is (EAC and IGAD are) the highest (least) performing. (ii) Surprisingly, in most RECs, the highest contributors to wealth creation are not the top performers in regional monetary integration. (iii) The RECs in Africa are characterized by a stable monetary integration which is different from the gradual process usually observed in monetary integration because with the exception of the EAC and UMA, the dynamics of IAMI show a steady trend in the overall index across time. Policy implications are discussed.

The analysis in the book compares Sierra Leone with other African countries, especially Ghana. Sierra Leone shares similar socio-economic characteristics with other sub- Saharan African countries that were colonized mostly by the British and the French, gained independence around the same period, and have undertaken similar economic policy reforms after independence. Sierra Leone and Ghana have adopted similar fiscal policies for the past decades, guided by the World Bank, the International Monetary Fund (IMF), the African Development Bank (ADB), and the West Africa Monetary Agency (WAMA). The two countries have strong democracies and enjoy and suffer similar political instabilities, even though Sierra Leone suffered from a terrible eleven-year civil war. Sierra Leone and Ghana shared similar government policies in the past—for instance, subsidized petroleum product. Both countries have had fuel crises, both introduced a goods and services tax during the same period, and both restructured their national revenue collection systems.

The paper examines the impact of interest rates on investment in Nigeria from 1986 to 2018, using co-integration and vector error correction approach. The specific objectives were to estimate the short-and long-run elasticities as well as the error correction mechanism of interest rate, inflation rate and exchange rate on investment in Nigeria. The outcome of the exercise validated the hypothesis that interest rate has impact on investment in Nigeria, albeit with mixed results as the first lag period of all the three indicators used indicated positive relationship with the growth of investment but the lag of the second period all indicated negative impact on investment. The error-correction equation of investment indicates a feedback of 53.1 per cent, of the first period lag but 47.1 per cent, of second period lag. Also, the error-correction term indicated low speed of adjustment with only 2.0 per cent.

This chapter provides a conceptual basis for the price discovery potential for tradable market instruments and specifically the development of mortgage securitization in Asia. We argue that securitization in Asia may be potentially important because it may help bring transparency to the financial sector of Asian economies. We put forth a model explaining how misaligned incentives can lead to bank-generated real estate crashes and macroeconomic instability. We provide new comparative data on the banking sector's ...

The main objective of the study was to determine the nature of the nexus between financial sector development and economic growth with specific reference to the Namibian economy. The reason why I carried out this study is that no similar study has yet been carried out in Namibia and the nature of the relationship between financial development and economic growth is still not known. This study, therefore, is the first step in attempting to provide literature that could be useful to policy makers and academics in Namibia. We used the Granger causality tests to establish the relationship among the financial sector indicators and economic growth indicators after having carried out the unit root and co integration tests. The results show that the Granger causality between financial development and economic growth is by and large bidirectional. In other words, this means that when the economy grows the financial sector may respond positively and vice versa. We also found that the financia...

This paper is based on a joint project by The Ministry of Economic Development and Treasury to examine the link between New Zealand's financial system and economic performance. Overall economic performance is influenced by a wide range of factors including the financial ...

Table of Contents

I. World Bank's Strategic Compact
A. Costs and Downsizing
B. New Initiatives
C. Partnerships: Hallmark of the Restructuring
D. Jekyll And Hyde: The Bank's Double Identity

II. A "Jury" Looks at Adjustment in Africa
A. The Evaluation
B. The Philosophy
C. Background: The Last Plenary Of The Special Program Of Assistance to Africa (SPA)

III. Assorted Publication