Rural development in the digital age: Does information and communication technology adoption contribute to credit access and income growth in rural China?

Information and communication technology (ICT) plays an important role in rural livelihoods and household well-being. Therefore, this study examines the impact of ICT adoption on farmers' decisions to access credit and the joint effects of ICT adoption and access to credit on household income using 2016 China Labour-force Dynamics Survey data. Both recursive bivariate probit model and a selectivity-corrected ordinary least square regression model are employed for the analysis. The results show that ICT adoption increases the probability of access to credit by 12.8% in rural China and empowers rural women and farm households in relatively less-developed regions to access credit. ICT adoption and access to credit affect household income differently. ICT adoption significantly increases household income, while access to credit significantly reduces it, primarily because farmers do not use the acquired credit to invest in income-generating farm and off-farm business activities. ICT adoption has the largest positive impact on household income at the highest 90th quantile. Our findings suggest that improving rural ICT infrastructure to enhance farmers' ICT adoption and developing ICT-based financial products to enable households to access sufficient funds can improve rural household welfare.     

Econometric analysis of credit constraints of chinese rural households and welfare loss

Using recent survey data of Chinese rural households, we estimate the impact of credit constraints on Chinese rural households’ income and consumption. Results reveal that 71% of rural households are rationed in the credit markets. The credit constraints have significant negative effects on the income and consumption of rural households. The expenditures on education and medical treatments, the size of land holdings, household head education and the balance of financial capital all affect the demand of credit. Personal connections (relationship) are the most important determinate of the supply for credit.     

Financial Globalization,Social Exclusion and Financial Crisis

This paper suggests one set of mechanisms that ties financial globalization processes to local dynamics of financial inclusion or exclusion. Specifically, this paper explores the worldwide reconsideration of financial firms’ strategies that has accompanied financial globalization. It is shown that the neoliberal and asymmetric‐information approaches to credit markets and financial crises in developing economies overlook these dimensions of financial globalization because of their tendency to focus on representative credit markets. Banks’ strategic shift has led to the global homogenization and stratification of financial practices—and this in turn has been a key driver of processes of financial exclusion. Financial exclusion then involves bifurcation within financial markets, so that different markets serve different portions of the household and business population. This analysis suggests a reconstruction of Minsky’s microfoundational model of the origins of financial fragility and crisis, which shifts from Minsky’s emphasis on a representative borrower–lender relationship to a situation of borrower–lender relationships in bifurcated markets.     

Housing and credit market shocks: Exploring the role of rule-based Basel III counter-cyclical capital requirements

This paper examines the extent to which the Basel III bank capital regulation attenuates fluctuations in housing and credit markets and fosters financial and macroeconomic stability. We use a positive housing demand shock to mimic a housing market boom and a negative financial shock for credit squeeze and economic meltdown. The results show that the rule-based Basel III counter-cyclical capital requirement effectively attenuates fluctuations in housing and credit markets and prevents bubbles. In the case of a negative financial shock, it significantly reduces the magnitude of economic meltdown. Our analysis of the transition from Basel II to Basel III suggests that it is the counter-cyclical capital buffer that effectively mitigates the pro-cyclicality of its predecessor, while the impact of the conservative buffer is marginal. In contrast to the credit-to-GDP ratio, the optimal policy analysis suggests that the regulatory authority should adjust the capital requirement to changes in credit and output when implementing the counter-cyclical buffer. Future research could extend the study by comparing the effectiveness of the rule-based Basel III with other macroprudential tools in achieving financial and macroeconomic stability.     

Debt and credit: Recent Canadian developments

In our examination of how recent developments (to 1988) in debt and credit markets have affected the Canadian economy, we compare the recent experience of borrower behavior in Canada with that in the United States, looking at debt-GDP ratios for various sectors and the corporate debt-equity ratio. In the late 1980s, the key differences between the two countries in the financial behavior of both the household and corporate sectors derive, we believe, from the sharper shock faced by Canadians in the early 1980s. Our examination of the relationship between credit growth and the growth of spending in the Canadian economy utilizes credit-indicator models developed at the Bank of Canada. We find that over the 1980–1987 period forecasts of the growth of real GDP and nominal GDP based on indicator models using real total household credit and nominal consumer credit, respectively, have narrowly outperformed the best bivariate monetary indicator models.     

农户金融抑制及其福利损失的计量分析

本文运用biprobit模型和match模型,采用3000个农户的微观数据,计量分析了农户金融抑制的程度及其福利损失的大小。研究发现,农户金融抑制的程度为70.92%;由于金融抑制,所有样本农户平均所损失的纯收入、净经营收入、消费性支出和非土地性资产分别为9.43%、15.43%、15.57%和14.58%,直接受到金融抑制的样本农户平均所损失的纯收入、净经营收入、消费性支出和非土地性资产分别为9.55%、16.83%、16.46%和14.70%;土地面积、教育和医疗费用支出,对农户资金需求具有正的显著影响,金融资产余额对农户资金需求具有负的显著影响,生产性固定资产原值、受教育水平、交通条件和地理位置对农户资金需求的影响不显著;土地面积、受教育程度、地理位置和“关系”对资金供给具有正的显著影响,固定资产总值、交通条件对资金供给的影响不显著。     

The demand and supply of credit for households

The demand and supply of credit in the rural credit markets is investigated in this article using household data from India. The aim is to study the effects of household, farm productive characteristics and the policy variables on the demand and supply of credit. A type 3 Tobit model is estimated which corrects for sample selection and endogeniety bias. In addition, a generalized Double Hurdle model is estimated where the information on the household's access to credit is included to estimate the demand and supply of credit. The results suggest that the size of the operational holdings, net-wealth, dependency ratio, educational level of the household and the wages and output prices are important determinants of the demand and supply of credit for farm households. The Double Hurdle model confirms that the ‘size of land owned’ plays a crucial role in whether the household has access to a loan or not.     

Business cycle fluctuations and household saving in OECD countries: A panel data analysis

We investigate the cyclicality of the household saving to household disposable income ratio for a panel of 16 OECD countries over the period 1969–2012. We find evidence that the household saving ratio is countercyclical. We empirically investigate whether the determinants of saving suggested by a standard buffer stock model of saving can explain this finding. The three main determinants of household saving implied by such a model (i.e., unemployment risk, household wealth and credit constraints) have a significant impact on the household saving ratio while their combined effect completely offsets its countercyclicality. The saving regression results are robust to potential endogeneity of the regressors, to making use of a reduced sample size that leaves out the period of the Great Recession, and to the one-by-one addition of variables suggested by alternative theories that also predict a countercyclical saving ratio.     

Restoring Macroeconomic Stability through Fiscal Adjustment: a Real–Financial CGE Analysis for India

Developing‐country attempts to regain macroeconomic stability through fiscal adjustment are often unsuccessful in reducing inflation and balance‐of‐payments (BoP) disequilibrium. This paper examines why this may be so in the light of India's experience with stabilization in response to the BoP crisis in 1991. It does so using a novel real–financial computable general‐equilibrium model. Focusing on credit rather than money, the model goes beyond earlier modeling approaches by (1) incorporating credit rationing, (2) recognizing the dual role of credit for working capital and investment, and (3) allowing for switches between credit‐constrained, capacity‐constrained, and demand‐constrained, regimes. The simulations indicate that the macroeconomic effects of monetized deficit reduction differ widely depending on the mode of financing and on initial conditions in real and financial markets. Whenever fiscal reform leads to a squeeze on available working capital credit, deficit reduction will lead to only a limited inflation decline and a modest BoP improvement.     

Financial openness and capital mobility: a dynamic panel analysis

Does unrestricted control on the movement of capital increase capital mobility? Theoretically, the answer is yes. This paper uses the Feldstein–Horioka savings–investment methodology to examine the impact of financial openness on the degree of capital mobility in 104 countries. Our estimates suggest that financial openness has increased capital mobility in developing countries, while its effect is statistically insignificant in OECD countries. This also implies that a developing country with more financial openness can have more access to external capital markets for borrowings. Foreign aid also appears to supplement domestic savings for investment in developing countries. In line with the previous findings, our study also confirms that capital is more mobile for developing countries.     

Why don't banks lend to Egypt's private sector?

Bank credit to Egypt's private sector decreased over the last decade, despite a recapitalized banking system and high rates of economic growth. Recent macro-economic turmoil has reinforced the trend. This paper explains the decrease based on credit supply and demand considerations by 1) presenting stylized facts regarding the evolution of the banks' sources and fund use in 2005 to 2011, noting two different cycles of external capital flows, and 2) estimating private credit supply and demand equations using quarterly data from 1998 to 2011. The system of simultaneous equations is estimated both assuming continuous market clearing and allowing for transitory price rigidity entailing market disequilibrium. The main results are robust to the market clearing assumption. During the global financial crisis, a significant capital outflow stalled bank deposit growth, which in turn affected the private sector's credit supply. At the same time, the banking sector increased credit to the government. Both factors reduced the private sector's credit supply during the period under study. After the trough of the global crisis, capital flowed back into Egypt and deposit growth stopped being a drag on the supply side, but bank credit to the government continued to drive the decrease in the private sector's credit supply. Beginning in the final quarter of 2010, capital flows reversed in tandem with global capital markets, and in January 2011 the popular uprising that ousted President Hosni Mubarak added an Egypt-specific shock that accentuated the outflow. Lending capacity dragged again, accounting for 10% of the estimated fall in private credit. Credit to the government continued to drain resources, accounting for 70–80% of the estimated total decline. Reduced economic activity contributed around 15% of the total fall in credit. The relative importance of these factors contrasts with that of the preceding capital inflow period, when credit to the government accounted for 54% of the estimated fall, while demand factors accounted for a similar percentage.     

The equity price channel in a New-Keynesian DSGE model with financial frictions and banking

This paper studies the role of the equity price channel in business cycle fluctuations, and highlights the equity price channel as a different aspect to general equilibrium models with financial frictions and, as a result, emphasizes the systemic influence of financial markets on the real economy. We develop a canonical dynamic general equilibrium model with a tractable role for the equity market in banking, entrepreneur and household economic activities. The model is estimated with Bayesian techniques using U.S. data over the sample period 1982Q01–2015Q01. We show that a dynamic general equilibrium model with an equity price channel well mimics the U.S. business cycle. The model reproduces the strong procyclicality of the equity price. The equity price channel significantly exacerbates business cycle fluctuations through both financial accelerator and bank capital channels. Our results support the increasing emphasis on common equity capital in Basel III regulations. This is beneficial in terms of financial stability, but amplifies and propagates shocks to the real economy.     

Remittances and rural credit markets: Evidence from Senegal

This study investigates the relationship between remittances and credit markets in Senegal, focusing on rural areas where financial constraints are more challenging. Using a household fixed effects model, the findings show that remittances and credit markets are complements; namely, the receipt of remittances is positively associated with the likelihood of having a loan in a household. This means that migrants can increase the reliability of their family members and close relatives back home through their remittances, insuring them vis‐à‐vis lenders for their credit contracts. They are the collateral or the “element of trust” in the credit contract between the borrower and the lender, representing a potential alternative in case of non‐repayment. This result is robust to alternative models and various robustness tests mitigating the potential endogeneity of remittances. A detailed analysis also shows that the relationship between remittances and credit markets is mainly driven by loans taken for consumption and food, in particular, as well as loans provided by informal institutions.     

How Social Developmentalism Reframed Social Policy in Brazil

This paper proposes to critically situate how social developmentalism reshaped social policy in Brazil in the 2000s, to stimulate access to credit and to financial markets, thereby fostering a transition towards a mass-consumption society. This structural move is radically distinct from the very framework which inspired the tenets of early Latin American structuralist thought in the post-war period. Whereas seminal structuralism neglected the role of social policy, Brazilian social developmentalism reframed it to broaden access to consumer credit and other financial services, such as insurances. In this new financialised framework, social policy has been used to underwrite a financial inclusion model that overturned classic tenets of social policy. As a result, not only household debt has abruptly escalated, but also social insurance and welfare benefits have been partially absorbed as financial rents, deepening economic insecurity and social vulnerability.     

Intellectual capital and firm performance: evidence from Indian banking sector

In the aftermath of the 2008 financial crisis, the entire Indian banking industry was paralysed and their performance was shattered by the unfolding of enormous cases of Non-performing Assets (NPA). The study estimates the operating efficiency of 40 Indian banks for 5 years (2011–15) as a proxy of performance measure using the output-oriented DEA-BCC model. We find that nearly 62% of the state-owned banks and 47% of the private banks are inefficient indicating that the inefficient banks need to reduce their inputs or improve their output to become efficient. The study further investigates the relationship between intellectual capital (IC) and bank performance using a truncated regression model. The regression results show that out of the three components of intellectual capital, only human capital efficiency is positively and significantly associated with operational efficiency while structural capital and finance capital have a negative impact on the efficiency of banks. The study concludes that to achieve competitive edge banks should invest in their human capital. The results are robust in the case of financial variables taken as a proxy for performance.     

Growing into Export Markets: The Impact of Exporting on Firm‐level Investment in Indonesia

This paper documents the impact of exporting on capital accumulation across heterogeneous manufacturing firms in Indonesia. The findings show that entering export markets significantly increases investment behavior during the year of initial entry and for as much as three years after entry. The results imply that the investment rate among new exporters is 37% higher than non‐exporters in the year of entry and 14–26% higher in the three years after entry. Using detailed data on firm ownership, the paper further show that foreign‐owned affiliates invest at systematically higher rates upon entry into export markets. The estimates indicate that domestically owned exporters are potentially credit constrained and suggest that improving credit market access may increase the investment rate among domestic exporters by as much as 40% in the year of entry.     

Collective Choice and Control Rights in Firms

Recent writers have asserted that firms controlled by workers are rare because workers have diverse preferences over firm policies, while investors all support wealth maximization. However, the source of the asymmetry between capital and labor remains unclear. We resolve this puzzle by arguing that because financial capital is exceptionally mobile, capital markets induce unanimity. The lower mobility of human capital implies that labor markets are monopolistically competitive and hence that unanimity cannot be expected in labor‐managed firms. Moreover, such firms are vulnerable to takeover by investors, while capital‐managed firms are substantially less vulnerable to takeover by workers.     

Information and credit access: using bankruptcy as a signal

Legally, a bankruptcy flag can appear on an individual's credit report for up to 10 years after the filing. The flag affects an individual's credit score, and in turn, an individual's access to credit. In this article, we investigate how the bankruptcy flag affects access to credit along three dimensions–loan acceptance, the price of the loan as is determined by the interest rate, and the amount of credit the household receives. Using the Panel Study of Income Dynamics and the Survey of Consumer Finances, we estimate a series of two-stage models corrected for sample selection and adjusted to account for the household's level of creditworthiness. We find that the bankruptcy flag increases the probability of being denied access to a loan. The flag also increases interest rates for unsecured loans and lowers the credit limits available to households. The findings have important implications with respect to current bankruptcy code and the impact that information, such as the bankruptcy flag, can have on the efficiency of the credit markets.     

Volatility transmission to the fine wine market

The goal of this paper is to explore volatility transmission from various markets to the fine wine market. Knowledge of these channels for transmitting volatility to the wine market allows practitioners to anticipate the future volatility and the consequences of a shock on the wine market, to develop their investment strategy and diversify their risk. We especially analyse the impact of U.S. markets (i.e. art, commodities, credit, financial and real estate) during the 2007–2017 period. We shed additional light on how the volatility of the fine wine market varies during an extended period including a financial crisis. Our results indicate that, in the short-term, volatility is transmitted with a negative effect through the financial and commodity markets and with a positive effect through the art, residential real estate, and credit default markets. In the long-term, the wine market is impacted by all other markets. We show that correlations are time-varying.     

Credit rationing and capital accumulation with investment and consumption loans revisited

A simple model is developed to evaluate the roles of credit rationing and government policies of financial repression in the process of capital accumulation. In the model, credit rationing on both investment and consumption loans decreases as capital accumulates but increases as the government imposes policies of financial repression to a greater extent. While a reduction in credit rationing on consumption loans impedes capital accumulation, such a reduction on investment loans facilitates it. We find that developing countries may be trapped at a low-capital-stock steady state while developed countries converge to a high-capital-stock steady state. Instead of adopting policies of financial liberalization, interestingly, this paper finds that policies of financial repression may enable developing countries to escape the development trap.