Competitiveness and Efficiency of the Banking Sector and Economic Growth in Egypt

Abstract: This paper investigates the impact of financial reforms on competitiveness and production efficiency of the banking sector, as well as the short‐term and long‐term impact on economic growth, in Egypt during 1992–2007. The results suggest that the reforms have a positive and significant effect on competitiveness and production efficiency. Also, the evidence shows that state‐owned banks are generally less competitive than private banks and foreign banks are less competitive than domestic banks. The average x‐inefficiency of Egyptian banks is around 30 per cent, which is comparable to those reported for other African countries. Finally, there is evidence to suggest a significant relationship between financial bank productive efficiency and economic growth in the short run but not in the long run. Overall, the results support the argument for continuing the financial sector reform programme in Egypt.     

Liberalizing Reforms and the European Union: Accession,Membership, and Convergence

The European Union (EU) may promote reforms to policies and institutions through at least two distinct mechanisms. First, accession to the EU requires countries to undertake reforms. Second, the EU common market may promote Tiebout jurisdictional competition. We empirically evaluate these two mechanisms using an unbalanced panel of up to 45 European countries during 1970–2010. We find that relationships between EU accession/membership and measures of policies/institutions are often statistically insignificant. Furthermore, when the estimated effects are statistically significant they are generally modest.     

Vietnam: an economic survey

This paper reviews the two decades of economic development in Vietnam since Doi Moi, with the recurrent theme that integration with the world economy brings substantial benefits when accompanied by domestic reforms—when transition catches up with integration. In the 1990s, liberalisation of the agricultural sector—and of trade generally—led to rapid economic growth and reductions in poverty. Since 2001, addressing the extreme bias against the private sector has resulted in growth via development of labour‐intensive industries as well as enabling Vietnam to climb onto the first rung of the ladder in the global supply chains of electronics and related manufacturing. However, deeper international integration has made the economy more vulnerable to external shocks. Although Vietnam achieved two decades of rapid growth as well as survived the global financial crisis in better shape than most other economies of similar size in the region, prospects of sustaining another decade of rapid growth are far from assured. Vietnam still has very large state‐owned enterprises in capital‐intensive industries. The recent extension of these large enterprises into real estate and finance contributed to de‐stabilise the macro‐economy, and administrative measures were adopted to pare back some of these ‘non‐core’ activities. However, administrative measures are hard to sustain once a crisis is over. The Vietnamese government has the goal of transforming Vietnam into an industrialised society over the coming decade. The recent macroeconomic turbulence has demonstrated that the country needs strong macroeconomic institutions capable of stabilising the economy and setting the parameters for resumption of rapid growth. Thus there is a strong case for the development of modern public institutions as the focus of the third phase of reforms.     

Financial reforms and capital accumulation in developing economies: New data and evidence

This study uses newly constructed data on structural reforms and private and public capital stock to assess the effects of financial reforms on capital formation in developing economies. We find that while both domestic and external financial reforms are important determinants of capital formation, the former is more influential in middle-income countries (MICs) and the latter in low-income countries (LICs). For LICs, external financial reforms work mostly through attracting FDI. For MICs, within domestic financial reforms, what matters most are measures related to strengthening banking supervision and reducing credit controls. These results are driven by capital formation in the private sector. In addition, these effects are nonlinear, and it is important for a country's policy when it comes to the sequence of implementing domestic and external financial reforms. Given the importance of public investment in decarbonization, this study further discusses the potential impacts of financial reforms on climate change and carbon inequality.     

The impact of business regulatory reforms on economic growth

I investigate the link between business regulatory reforms and economic growth in 172 countries. I create a 5 year dataset on business regulatory reforms from the World Bank’s Doing Business reports. Then, I test the hypothesis that business regulatory reforms increase economic growth, using data on micro-economic reforms. These data do not suffer the endogeneity issues associated with other datasets on changes in economic institutions. The results provide a robust support for the claim that business regulatory reforms are good for economic growth. The paper establishes that, on average, each business regulatory reform is associated with a 0.15% increase in growth rate of GDP.     

Trade facilitation in ASEAN member countries: Measuring progress and assessing priorities

This paper reviews progress and indicators of trade facilitation in member countries of the Association of Southeast Asian Nations. The findings show that import and export costs vary considerably in the member countries, from very low to moderately high levels. Tariff and non-tariff barriers are generally low to moderate. Infrastructure quality and services sector competitiveness range from fair to excellent. Using a standard gravity model, the authors find that trade flows in Southeast Asia are particularly sensitive to transport infrastructure and information and communications technology. The results suggest that the region could make significant economic gains from trade facilitation reform. These gains could be considerably larger than those from comparable tariff reforms. Estimates suggest that improving port facilities in the region, for example, could expand trade by up to 7.5% or $22bn. The authors interpret this as an indication of the vital role that transport infrastructure can play in enhancing intra-regional trade.     

Glass Ceilings versus Sticky Floors: Evidence from Southeast Asia and an International Update

Using counterfactual decompositions combined with quantile regression, we investigate the pattern of gender wage differentials in Asian and Latin American countries and combine the findings with existing evidence for European and other mostly developed countries. While in the group of Latin American countries glass ceilings are prevalent, no clear evidence of glass ceilings is found in the group of Asian countries where, generally, sticky floors or a mixed pattern is the norm. The findings are robust with as well as without occupation controls. In addition, analysis by sector points to glass ceilings in the public sector in most countries, while in the private sector the patterns vary. Combining the new evidence from the present study with existing evidence (in total we consider 60 countries), a comprehensive global picture of gender wage differentials is provided. Possible explanations for differences in patterns of gender wage differentials are discussed.     

IMF-Supported Stabilization Programs and their Critics: Evidence from the Recent Experience of Egypt

The IMF-supported stabilization and structural adjustment programs implemented by Egypt in the 1990s were successful in meeting their objectives, and when compared with earlier attempts and the experience of other developing countries. The authorities undertook a sharp reduction in the government's overall deficit and its central bank financing allowing for increased credit availability to the private sector within a framework of a rapidly decelerating monetary expansion. Despite initiating comprehensive market reforms that significantly improved the environment for private investment, the response of the private sector has been disappointing. It is argued that until institutional, regulatory and political constraints are removed, Egypt will not join the group of high-investing and fast-growing economies.     

Financial Sector Reforms,Bank Performance and Economic Growth: Evidence from Zambia

Abstract: This paper investigates the effects of market‐based financial sector reforms on the competitiveness and efficiency of commercial banks, and economic growth, in Zambia. The results show that reforms adopted in Phase II (strengthening of regulatory and supervisory, payments and settlements, and financial operations frameworks) and Phase III (implementation of a comprehensive financial sector development plan) had significant positive effects on bank cost efficiency. Macroeconomic variables such as per capita GDP and inflation were insignificant. Further, using an endogenous growth model in which industrial production is a proxy for GDP growth, it was found that bank cost efficiency, financial depth, Phase II and III financial sector reforms, the degree of economic openness, and rate of inflation were significant determinants of economic growth. Phase II policies and the inflation rate have negative effects while the rest of the variables have positive effects on economic growth. Some plausible policy lessons are offered.     

Privatization: Possible lessons from the Hungarian case

Hungary was the first Eastern European country to tackle the problem of economic reform: initially in piecemeal fashion, then by introducing broad sets of measures aimed at establishing a market-based economic system. This paper reviews the Hungarian experience with privatization policies and presents some general conclusions regarding the design of successful privatization schemes that might serve as rough guidelines for other countries trying to reduce a vastly overextended public sector.     

Liberalisation and Financial Sector Competition: A Critical Contribution to the Empirics with an African Assessment

This paper investigates how financial, trade, institutional and political liberalisation policies have affected financial sector competition in Africa using updated data to appraise second‐generation reforms. The “freedom to trade” and “economic freedom” indices are employed. Hitherto, unexplored financial sector concepts of formalisation, semi‐formalisation, informalisation and non‐formalisation are also introduced. The following findings are established. First, relative to money supply, (i) with the exception of the economic freedom mechanism, liberalisation policies have generally decreased the growth of the formal financial sector to the benefit of other financial sectors; (ii) apart from the foreign direct investment and economic freedom channels, liberalisation policies have been fruitful for semi‐formal financial development at the cost of other financial sectors and; (iii) with the exception of economic freedom, both the informal and non‐formal sectors have developed owing to liberalisation to the detriment of the formal financial sector. Second, relative to gross domestic product, the semi‐formal, informal and/or non‐formal financial sectors have also generally improved as a result of liberalisation. Policy implications are discussed.     

Stimulating Growth and Investment in Africa: From Macro to Micro Reforms

Abstract: How do we stimulate investment and growth in Africa? This paper focuses on low‐income countries that are ‘good performers’ and not especially endowed with natural resources. Many of these countries have undertaken a set of economic reforms, and have recorded growth rates in per capita GDP of around 5 percent over the past 10 years. But some constraints to growth persist. We look at three things — how business environments create ‘external costs’ for firms and inhibit performance, how investors perceive the constraints to doing business, and the role of political economy factors especially in those countries with lagging indigenous business sectors. Our analysis of investment climate and other data leads us to several recommendations for governments, donors and the private sector itself, including the following: deepen macro reforms; build a strong, unified business forum; create incentives for more responsive governments; and improve risk mitigation and broaden this to domestic investors.     

Measurement of the intensity of the reforms in professions and economic activities in Greece via a composite regulation index

The institutional framework regulating professions/ economic activities of the service sector in Greece has been recently liberalised extensively, to promote competition, conform to European Community regulations and fulfil commitments under the Memoranda of Economic and Financial Policies. This paper aims to capture quantitatively this major structural reform, by measuring for the first time the degree of regulation in 90 professions/ activities affected by the relevant reform laws. The degree of regulation is measured both for the regime before and for that after the laws, and the methodology employed is that of composite regulation indices. The index values obtained are used for evaluating the extent of the reforms and estimating correlations and regressions. The results of the analysis point to the existence of significant barriers to competition before the reforms and extensive liberalisation of the regulatory framework after the adoption of the relevant laws. Moreover, the results suggest that professions/activities characterised by more stringent restrictions before the reforms tend to be characterised by a comparatively higher intensity of regulations after the reforms.     

Hukou system reforms and skilled-unskilled wage inequality in China

In China, rural migrant workers usually cannot get fair treatment due to the hukou system. This paper investigates how hukou system reforms affect the skilled-unskilled wage inequality through the general equilibrium approach. In the basic model, we find that an increase in the strength of hukou system reforms will narrow down the wage inequality if the urban skilled sector is more capital intensive than the urban unskilled sector. In addition, we separately extend the basic model by introducing the endogenous minimum wage and an informal sector, and find that in these two extended cases the main results of the basic model will conditionally or unconditionally hold. When we consider some empirical evidences in China, our models predict that an increase in the strength of hukou system reforms will reduce the wage inequality.     

Is There a Bank Lending Channel in Southern African Banking Systems?

Abstract: Macroeconomic models currently used by policymakers generally assume that the functioning of financial markets can be fully summarized by financial prices, because the Modigliani and Miller (1958) theorem holds. However, the assumption that this theorem holds is questionable. This paper argues that there are frictions in the market which traditional models based on the Modigliani and Miller theorem fail to take into account in explaining how monetary policy and other shocks are transmitted to the economy and points to new directions. A comprehensive macroeconomic model should incorporate financial market interactions to enhance the understanding of the transmission mechanisms of monetary policy and other shocks. If market dynamics are not taken into account, macroeconomic models used by policymakers may point to wrong policy choices. Motivated by the lack of assessment of the recently launched financial reforms, deregulation, consolidations, financial innovations and joint payment systems, the paper assesses the process of monetary transmission mechanism by investigating evidence of a bank lending channel in SADC during the period 1990–2006 using data from the banking sector. Data from a panel of banks is used to identify shifts in the loan supply curve in response to changes in monetary policy using a vector autoregression (VAR) model. Although the results are mixed the paper generally reports the existence of a bank‐lending channel in all SADC countries in the sample. The take‐off point for monetary policy effects differs from one country to another.     

Free Trade Agreements and the SADC Economies

Countries in southern Africa have engaged in a variety of tradeliberalisation initiatives such as the European Union (EU)–SouthAfrica Free Trade Agreement (FTA), the EU's ‘Everythingbut Arms’ (EBA) initiative to eliminate trade barriersagainst imports from the least developed countries and a potentialFTA among Southern African Development Community (SADC) countries.In this paper we use a multi-country computable general equilibrium(CGE) model to analyse the impact of trade liberalisation inthe region. First, we analyse the FTA between South Africa andthe EU. Then, we consider how the rest of southern Africa mightrespond: (i) by enforcing an SADC FTA; (ii) by exploiting theadvantages of unilateral access to the EU in addition to anSADC FTA; and (iii) by entering an FTA with the EU and otherSADC countries. The scenarios are ordered such that the SADCcountries pursue increased trade liberalisation. We find thatunder all FTA arrangements the increased total imports fromFTA partners exceeds the reduction in imports from non-FTA partners— the FTAs examined are all net trade creating. Some SADCeconomies are slightly hurt by the FTA between the EU and SouthAfrica, while others gain slightly. Overall, the agreement isnot a beggar-thy-neighbour policy. We also find that unilateralaccess to the EU is more beneficial for SADC countries thanan SADC FTA because the SADC countries trade more with the EUthan with each other. However, reciprocal reforms under an EU–SADCFTA dominate unilateral access to the EU because they requiremore structural adjustment in the SADC countries. Finally, wefind that South Africa is not large enough to serve as a growthpole for the region. Access to EU markets provides substantiallybigger gains for the other SADC countries than access to SouthAfrica.     

Pacific Island Economies: Performance, Growth Prospects and the Impact of the Asian Economic Crisis

The small Pacific island economies are increasingly challenged by globalisation. This paper, drawing on the limited literature, surveys the economic performance and growth prospects of six of the economies for which fair economic data are available, with special reference to the impact of the Asian crisis. Developments and problems are discussed country by country and sector by sector. In conclusion the author indicates the reforms needed to raise living standards in these small countries.     

Current account balances and structural adjustment in the euro area

In the past decade, a set of euro area countries has accumulated large current account deficits. After a brief relaxation of the euro area internal imbalances in the wake of the financial crisis, it appears as if this pattern arises anew when times normalize again and Germany still sticks to export-led growth. This issue has been labelled one of the most challenging economic policy issues for Europe inter alia by the European Commission and some other players on the EU level. In this paper, we analyse the role of private restructuring and structural reforms for the urgently needed sustainable readjustment of intra-euro area current account balances. A panel regression reveals a significant impact of structural reforms on intra-euro area current account balances. This implies that in particular structural reforms and wage restraint in notorious current account and budget deficit countries such as Greece are highly suitable to support long-term economic stability in Europe.     

Telecommunications reform in Indonesia: Achievements and challenges

Telecommunications reform in Indonesia has occurred in two phases. In the first, from 1989, private participation was permitted in the fixed-line sector through public–private partnership (PPP) arrangements. In the current reform phase, which began in 1999, a duopoly structure was created in fixed-line sector operations, accompanied by a pro-competitive regulatory regime. The first reform phase was not successful. This paper explains that contract-based PPP programs provided only short-term solutions to the problem of lack of capacity. The more wide-ranging 1999 reforms acknowledge the importance of competition and a sound regulatory regime in telecommunications reform, but there are still limits on market entry, and the problems of lack of interconnection and network development disparities remain.     

外资银行进入对东道国银行业效率的影响——东欧国家的经验与中国的实践

东欧国家银行改革的经验表明,外资银行进入能普遍提高东道国银行业的效率。但是,外资银行发挥积极作用亦取决于一定条件:东道国经济发展水平、银行业规模及发育程度、监管水平、银行业的改革路径和引资方式。本文在综述东欧国家银行业改革经验的基础上,提出中国银行业改革的7个命题,并用中国24家银行1999～2006年间的数据构建模型进行检验,最后得出结论:短期内外资银行进入会导致东道国银行业利润水平下降、风险管理水平上升,在中国的背景下可以认定这是外资银行积极作用的发挥;外资银行机构数量的增加和持股比重的上升都能刺激中国银行业效率的改进,但是外资银行持股比重的影响更具普遍性;不同类型银行对外资银行进入的反应存在差异,国有商业银行反应比较迟钝,而股份制和城市商业银行反应比较迅速。