Do microfinance institutions fulfil their promise? Evidence from cross-country data

The concept of microfinance promises poverty reduction and economic growth. We empirically challenge this economic and social promise in an attempt to prove its fulfilment. Our multivariate regressions of economic development variables such as per capita gross national income based on PPP converted to international dollars (GNI per capita PPP), GDP growth, as well as gross capital formation and labour participation rate against specific microfinance institutions’ (MFI) variables show that the success and performance of MFIs significantly influence economic development. Microfinance directly influences economic growth through the value that MFI performance adds to purchasing power. An indirect impact comes from an improvement in capital accumulation and employment rates. These insights are valuable as the interdependencies between microfinance and economic development that this article verifies offer new and progressive insights into purposeful action that can be taken to stimulate economic development and growth. Targeted development programmes as well as socially responsible investments can be applied in developing economies in order to strengthen their growth and alleviate poverty.     

Are economic growth and the variability of the business cycle related? Evidence from five European countries

We use a long series of annual data that span over 100 years to examine the relationship between output growth and its uncertainty in five European countries. Using the GARCH methodology to proxy uncertainty, we obtain two important results. First, more uncertainty about output leads to a higher rate of growth in three of the five countries. Second, output growth reduces its uncertainty in all countries except one. Our results are robust to alternative specifications and provide strong support to the recent emphasis by macroeconomists on the joint examination of economic growth and the variability of the business cycle.     

Does capital and financing structure have any relevance to the performance of microfinance institutions?

This paper aims to explore the impact of capital and financing structure on the performance of microfinance institutions (MFIs) from an agency theoretic standpoint. GMM and IV estimations with instruments have been performed using a panel dataset of 782 MFIs in 92 countries for the period 2000–2007. Results confirm the agency theoretic claim that an increase in leverage raises profit-efficiency in MFIs. The study also finds that cost efficiency deteriorates with decreasing leverage. Likewise, the negative significant impact of leverage on depth of outreach can also be explained. However, the study finds that capital structure does not have any noticeable impact on breadth of outreach and neither is it significantly related with women’s participation as loan clients.     

Has the Euro changed business cycle synchronization? Evidence from the core and the periphery

Using a Bayesian dynamic factor model, I examine the comovement of output, investment and consumption growth among Euro area countries before and after the introduction of the Euro. For that purpose, I compare a pre-Euro period (1991–1998) to a Euro period (2000–2010) and identify a common Euro factor for each period separately. I find that the comovement of main macroeconomic variables and the common factor increases for core Eurozone countries from the first to the second period, while it decreases for most peripheral economies. This can be interpreted as a rise in business cycle synchronization for the core and a respective decline for the periphery. Different to the implications made by the endogeneity argument of currency areas (Frankel and Rose in Econ J 108(449):1009–1025, 1998), my evidence suggest that the introduction of the Euro has fostered imbalances between core and peripheral Eurozone countries.     

Does integration and economic policy coordination promote business cycle synchronization in the EU?

Previous studies have discounted important factors and indirect channels that might contribute to business cycle synchronization (BCS) in the EU. We estimate the effects of market integration and economic policy coordination on bilateral business cycle correlations over the period 1995–2012 using a simultaneous equations model that takes into accounts both the endogenous relationships and unveils direct and indirect effects. The results suggest that (1) trade and FDI have a pronounced positive effect on BCS, particularly between incumbent and new EU members. (2) Rising specialization does not decouple business cycles. (3) The decline of income disparities in EU27 contributes to BCS, as converging countries develop stronger trade and FDI linkages. (4) There is strong evidence that poor fiscal discipline of EU members is a major impediment of business cycle synchronization. (5) The same argument holds true for exchange rate fluctuations that hinder BCS, particularly in EU15. Since BCS is a fundamental prerequisite and objective in an effective monetary union, the EU has to promote market integration and strengthen the common setting of economic policies.     

Are choice experiments reliable? Evidence from the lab

This study investigates whether a popular stated preference method, the choice experiment (CE), reliably measures individuals’ values for a good. We address this question using an induced value experiment. Our results indicate that CEs fail to elicit payoff maximizing choices. We find little evidence that increasing the salience of the choices or adding monetary incentives increase the proportion of payoff maximizing choices. This questions the increasing use of CE to value non-market goods for policy making.     

How does population aging affect the effectiveness of fiscal stimulus over the business cycle?

What is the impact of population aging on the effectiveness of fiscal stimulus over the business cycle? We address this question by estimating state-dependent fiscal multipliers in member countries of the Organisation for Economic Co-operation and Development (OECD). A government spending shock is identified as a forecast error of government spending and its output effect is estimated by using the local projection method. We find that there is no effect of population aging on output effects of fiscal spending shocks in expansionary times, whereas in recessions the output effects of fiscal spending shocks are weakened as population ages. This result points to important policy implications in that population aging would call for a larger fiscal stimulus to support aggregate demand during recession. Thus, this requires a larger fiscal space to allow for a wider swing of the fiscal position without creating concerns for fiscal sustainability.     

Are Gulf stock markets efficient? Evidence from new multiple variance ratio tests

The purpose of this article is to test for the Random Walk Hypothesis (RWH) for seven stock markets in Gulf Cooperation Council (GCC) countries, and to determine the effect of the correction for thin trading. Three new multiple variance ratio tests are applied to both observed returns and returns corrected for thin trading. It is found overall that the RWH does not hold for the GCC stock markets at both daily and weekly frequencies. This evidence is particularly strong when daily returns are used, where the RWH is soundly rejected for both observed and corrected returns.     

Are monetary policy shocks causal to bank health? Evidence from the euro area

Despite considerable efforts of the European Central Bank (ECB) to support bank intermediation after the 2008 financial crisis, the recovery of euro area banks remained incomplete. Although many studies indicate that central banks can influence the stock prices of firms through their policy actions and communication, a knowledge gap exists as to whether the ECB's monetary policy can influence bank health. Through a high-frequency identification approach, this study reveals that the causal effect of conventional monetary policy action and communication by the ECB on bank stock prices differed over time, whereas its influence on bank financing costs was robust. This study provides new evidence showing that information effects related to policy easing surprises in the aftermath of the 2008 financial crisis hampered the ECB efforts to improve bank health and that its Odyssean communication signals (related to forward-looking announcements of policy easing) supported bank health during this phase. Local projections suggest that the response of banks to monetary policy shocks displayed some persistence, where ECB policy surprises and communications that shifted up (down) the yield curve were normally positive (negative) for bank health. The findings solicit a new perspective when assessing the influence of the ECB's monetary policy measures on euro area banks.     

Are electronic government innovations helpful to deter corruption? Evidence from across the world

Electronic government innovations have been a critical development in public administration in recent years. Many countries have implemented e-government policies to enhance efficiency and transparency and combat corruption. This paper examines the impact of e-government on corruption using longitudinal data for more than 170 countries from 2002 to 2020. The empirical results suggest that e-government serves as a deterrent to corrupt activities. We analyse which e-government domains affect corruption, which types of corruption are more affected by e-government and the circumstances under which e-government is more effective in reducing corruption. The empirical results suggest that online service completion and e-participation are important features of e-government as an anticorruption tool. Evidence suggests that e-participation reduces corrupt legislature activities, public sector theft, executive bribery, and corrupt exchanges. The potential of e-government to deter corruption is higher in countries where corruption is moderate or high and economic development is lower. Higher levels of GDP per capita, foreign direct investment, and political rights are also associated with lower levels of corruption.     

Do community-driven development projects enhance social capital? Evidence from the Philippines

We explore the social capital impacts of a community-driven development project in the Philippines in which communities competed for block grants for infrastructure investment. The analysis uses a unique panel data set of about 2100 households, aggregated at the village-level, collected in 66 treatment and 69 comparison communities. We provide both difference-in-differences and propensity score matching estimates. We find that the project increased participation in village assemblies and the frequency with which local officials meet with residents and had a negative impact on collective action. There is also more limited evidence of a positive impact of the project on bridging (i.e., generalized) trust and of a negative impact on group membership.     

How helpful are social networks in finding a job along the economic cycle? Evidence from immigrants in France

Around 50% of individuals obtain or hear about jobs through social networks. This hiring trend may become problematic when the labor market is tight and people need less social contacts to find a job. Using a one-period static model where network members may receive job offers directly from the firm or indirectly through employed members in the network we show that the share of new hires finding a job through social connections (ie network matching rate) decreases with the job finding rate. Using French data for the period 2003–2012, we test this prediction with immigrants, a population subgroup for whom networks play a major role in occupational decisions. We propose two network matching rate indicators, one based on direct recommendations and another one internalizing the positive externality on the employment probability induced by peers. We find a decreasing relationship between the network matching rate and the job finding rate. Social connections are less helpful for finding jobs during economic expansions.     

Does economic freedom increase income inequality? Evidence from the EU countries

This paper examines the relationship between economic liberalization and income inequality in the EU using panel data for the 2000s. The empirical evidence suggests that economic freedom is strongly related to income inequality. However, not all areas of economic freedom affect income distribution similarly. Government size is robustly associated with inequality, and also when controlling for potential endogeneity in a dynamic panel data analysis. Regulation is linked to income inequality as well, whereas legal system and sound money have no significant effects on income distribution. In the case of freedom to trade internationally, the relationship differs between old (EU-15) and new (former socialist) EU countries.     

Budget support to the health sector—The right choice for strong institutions? Evidence from panel data

This article examines the relationship of sector budget support to the health sector and the infant mortality rate for developing countries. Project-type interventions have been widely used in developing countries in the past decades. These smaller-scale interventions often did not bring the results that the donors would have wanted, at least on a macro level. At the beginning of the millennium, forums on aid effectiveness proposed new principles to increase the effectiveness of aid. Many scholars agreed that one of the answers would be budget support. This article tries to answer whether budget support is the efficient aid modality in countries with strong institutions. In the baseline scenario, a panel data analysis is applied, which includes 113 countries between 2010 and 2018. This dynamic linear panel model is estimated by using ordinary least squares (OLS) and system generalized method of moments (GMM). Health sector aid, in general, has a significant and negative effect on the infant mortality rate in the average country. Sector budget support is insignificant in the baseline estimation and when interacted with a governance variable. In contrast, project-type interventions exhibit significant and negative effects on the outcome variable. The results indicate that sector budget support might not be the superior choice among the aid modalities in the health sector, even in countries with good governance.     

Effect of local government expenditure on the ratio of output to capital: Evidence from panel data at China��s provincial level

This paper divides the expenditure of local government into the productive and nonproductive expenditure for revealing the effect of local government’s expenditure on output-capital efficiency through model and empirical analysis. In general, the elasticity of productive expenditure is more than that of nonproductive in a developing country. Therefore, the drawing effect of productive expenditure on economic growth is more than nonproductive one. However, the positive drawing effect of local government’s expenditure on the ratio of output to capital can be displayed only if the expenditure is within a reasonable scale. When the public expenditure has surpassed the limit, there will be a negative influence. Through our empirical analysis on current Chinese economic data, it shows that the positive drawing effect of local government productive expenditure on the ratio of output to capital is remarkable; however, the positive effect of expenditure on economic construction is critically small. In some areas, the government expenditure behavior has indirectly become the economic intervention and it reveals the negative effect and low efficiency in high speed of economic growth. It is imperative for Chinese government to improve the efficiency of economic growth by adjusting the expenditure structure of local government.     

Do exchange rates affect the capital–labour ratio? Panel evidence from Canadian manufacturing industries

Using industry-level data for Canadian manufacturing industries from 1981 to 1997, we find empirical evidence of a negative relationship between the capital–labour ratio and the user cost of capital relative to the price of labour. A 10% increase in the user cost of the Machinery and Equipment (M&E) relative to the price of labour results in a 3.3% decrease in the M&E–labour ratio in the long run. Assuming complete exchange rate pass-through into imported M&E prices, the maximum effect of a permanent 10% depreciation in the exchange rate is a 1.7% decline in the M&E–labour ratio. This result implies that the cumulative growth of the M&E–labour ratio during the 1991 to 1997 period would have been 2.3 percentage points higher had the dollar not depreciated. This may appear to be significant, but considering both M&E as a share of total capital and the capital share of nominal output are both approximately one-third, in terms of a simple growth accounting framework, the effect on labour productivity is small.     

Do return migrants transfer political norms to their origin country? Evidence from Mali

This paper explores the link between return migration and political outcomes in the origin country, using the case study of Mali. We use electoral and census data at the locality level to investigate the role of return migration on participation rates and electoral competitiveness. First, we run OLS and IV estimations for the 2009 municipal election, controlling for current emigration and using historical and distance variables as instruments for return migration and current emigration. Second, we build a panel dataset combining the 1998 and 2009 censuses and the electoral results for the municipal ballots of those two years to control for the potential time-invariant unobservable characteristics of the localities. We find a positive impact of the stock of return migrants on participation rates and on electoral competitiveness, which mainly stems from returnees from non-African countries. Finally, we show that the impact of returnees on turnout goes beyond their own participation, and that they affect more electoral outcomes in areas where non-migrants are poorly educated, which we interpret as evidence of a diffusion of political norms from returnees to non-migrants.     

Remittances and healthcare expenditure: Human capital investment or responses to shocks? Evidence from Peru

This paper estimates the effect of international remittances on healthcare expenditures, taking into account both the interdependence with other consumption goods and the effects of health shocks. More precisely, we assess whether the budget allocation decisions of remittance‐receiving households reveal different preferences to invest in health capital, even when the simultaneous effect that health shocks may have on the demand of remittances and on other types of nondurable expenditures is accounted for. Using data from the “Peruvian National Survey of Households,” we find that remittances have a positive impact on healthcare budget shares, net of the remittance‐related income effect and independently of the occurrance of a health shock. They also have a positive impact on housing and a negative one on other expenditure items, that is, clothing, transport, and education. Hence, our results indicate a “pure” tendency of remittance‐receiving households to devote larger shares of their budget to health capital investment, rather than to other types of consumption goods.     

Are moving average trading rules profitable? Evidence from the European stock markets

This article examines the profitability of several simple technical trading rules for 16 European stock markets over the 1990 to 2006 period. Our results indicate that increasing moving average rules indeed have predictive power being able to discern recurring price patterns for profitable trading, even after accounting for the effects of data snooping bias. To assess the profitability of different technical trading rules and strategies, we adopt the White's (2000) Reality Check (RC) test that quantifies the data snooping bias and adjusts for its effects. Our empirical results also support the hypothesis that technical trading rules can outperform the buy and hold strategy after accounting for transaction costs.