Can good governance lower bank intermediation costs?

ABSTRACT

This paper argues that better governance practices can reduce the costs, risks and uncertainty of financial intermediation. Our sample covers 100 high-, middle- and low-income countries during 1996 to 2015. Using panel regressions accounting for endogeneity and cross-sectional dependance, we find that net interest margins of banks are lower if various governance indicators are better. Governance indicators range from comprehensive indices on the rule of law to more narrow indicators like ethics of private firms. The global financial crisis seems not to have had a strong impact except via credit risk. Finally, we estimate that potential annual savings from lower net interest margins could average almost 0,3 percent of GDP, had the governance indicators been at the top decile. These simulations lend credence to the intuition that better governance practices should reduce costs, risks and uncertainty.     

Marine-tourism development on a small island in Indonesia: blessing or curse?

Indonesia is a popular tourist destination. Tourism creates jobs and generates revenue but can have negative impacts on culture, society and human rights. This study of one island community in Indonesia explores the relationship between the growth of tourism and the impacts on a local community. A quantitative survey, combined with in-depth interviews, examined perceptions of residents to tourism development. Residents perceived that tourism created jobs and improved access to goods and services. However, tourism has reduced social cohesion and decreased adherence to traditional customs. Conflict between the private sector and residents over ownership and access have also caused violence.