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81. Household Financial Assets in the Process of Development

Author:
Patrick Honohan
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Systematic information on household financial asset holdings in developing countries is very sparse; we review some available data and current policy debates. Although financial asset holdings by households are highly concentrated, deeper financial systems are correlated with improved income distribution. For low-income countries, the relevant question for poor households is not how much financial assets they have, but whether they have any access to financial products at all. Building on and synthesizing disparate data collection efforts by others, we produce new estimates of access percentages for over 150 countries. Across countries, access is negatively correlated with poverty rates, but the correlation is not a robust one, thus the supposed anti-poverty potential of financial access remains econometrically elusive. Despite policy focus on the value of credit instruments, it is deposit products that tend to be the first to be used as prosperity increases, before more sophisticated savings products and borrowing.
Topic:
Civil Society, Development, Economics, and Poverty

82. Financial Development, Growth, and Regional Disparity in Post-Reform China

Author:
Zhicheng Liang
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Deepening financial development and rapid economic growth in China have been accompanied by widening income disparity between the coastal and inland regions. In this paper, by employing panel dataset for 29 Chinese provinces over the period of 1990-2001 and applying the generalized method of moment (GMM) techniques, we examine the impacts of financial development on China's growth performance. Our empirical results show that financial development significantly promotes economic growth in coastal regions but not in the inland regions; the weak finance-growth nexus in inland provinces may aggravate China's regional disparities.
Topic:
Conflict Resolution, Development, and Economics
Political Geography:
China and Asia

83. Spatial Convergence in China: 1952-99

Author:
Geoffrey J.D. Hewings, Dong Guo, and Patricio Aroca
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The purpose of this paper is to examine the convergence process in China by taking into account the spatial interaction between factors. The paper shows that there has been a dramatic increase in the spatial dependence of China's per capita GDP in the last 20 years. The consequence of space plays an important role, which is reflected in the influence of a neighbour's condition on the mobility of a province's income distribution from one category to another. The dynamics of the process showed evidence that China's distribution has gone from one of convergence to stratification, and from stratification to polarization.
Topic:
Demographics, Development, and Economics
Political Geography:
China and Asia

84. Institutional Analysis of Financial Market Fragmentation in Sub-Saharan Africa: A Risk-Cost Configuration Approach

Author:
Machiko Nissanke and Ernest Aryeetey
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The paper examines the source of financial market fragmentation in sub-Saharan Africa in the framework of institutional economics. Based on fieldwork data from Ghana, Malawi, Nigeria, and Tanzania, it analyses financial risk management, the transaction costs for loan screening and monitoring, and contract enforcement. It shows how, faced with various institutional constraints, the range of clientele selected by formal and informal lenders becomes both narrow and at the extreme market-ends. It evaluates the prevailing state of managing risks for market structure, and binding institutional constraints for market transformation and deepening in sub-Saharan Africa.
Topic:
Development, Economics, and Markets
Political Geography:
Africa, Tanzania, Nigeria, Ghana, and Malawi

85. The Determinants of Loan Contracts to Business Firms: Empirical Evidence from a Private Bank in Vietnam

Author:
Robert Lensink and Pham Thi Thu Trà
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper deals with loan contracting from a private bank in Vietnam. We focus on the main loan contract features that the bank uses in lending to business firms, namely loan maturity, collateral and loan interest rate. Based upon the simultaneous equation model of Dennis et al. (2000) and the bank's loan contracting policies, we examine the possible interdependency of the three different loan contract terms. Also, we try to determine which firm characteristics and exogenous factors are relevant for loan contracts. We find strong interdependencies between these contract terms with significant bi-directional relationships between collateral and loan maturity, loan rate and loan maturity, and a uni-directional relationship between loan rate and collateral. The conflicting signs within the collateral–loan maturity relationship and the loan interest rate–loan maturity relationship can be explained by our hypothesis that the choice for a certain loan maturity is primarily determined by borrowers' behaviors, whereas the loan rate and the collateral requirements are primarily determined by banks policies. In addition, our results support the relevance of firm quality, agency costs of debt and relationship lending in loan contract design.
Topic:
Economics and International Trade and Finance
Political Geography:
Vietnam and Southeast Asia

86. Financial Sector Development and Growth: The Chinese Experience

Author:
Mingming Zhou and Iftekhar Hasan
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper documents the financial and institutional developments of China during the past two decades, when China was successfully transformed from a rigid centralplanning economy to a dynamic market economy following its unique path. We empirically examine the relationship between financial development and economic growth in China by employing a panel sample covering 31 Chinese provinces during the important transition period 1986-2002. Our evidence suggests that the development of financial markets, institutions, and instruments have been robustly associated with economic growth in China.
Topic:
Development, Economics, and International Trade and Finance
Political Geography:
China and Asia

87. Excess Credit and the South Korean Crisis

Author:
Bassam A. Fattouh and Panicos O. Demetriades
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We provide a novel empirical analysis of the South Korean credit market that reveals large volumes of excess credit since the late 1970s, indicating that a sizeable proportion of total credit was being used to refinance unprofitable projects. Our findings are consistent with theoretical literature that suggests that soft budget constraints and overborrowing were significant factors behind the Korean financial crisis of 1997-98.
Topic:
Economics, International Trade and Finance, and Markets
Political Geography:
Asia, South Korea, and Korea

88. The Rise and Halt of Economic Development in Brazil, 1945-2004: Industrial Catching-up, Institutional Innovation and Financial Fragility

Author:
Nelson H. Barbosa-Filho, José A.P. de Souza, and Leondardo Burlamaqui
Publication Date:
08-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper seeks to explain the dynamics of Brazilian industrial catch-up in the last 60 years by discussing its background institutional conditions as well as its main macroeconomic features. After a brief introduction, the second section describes how after the institutional innovations introduced during the Vargas' and Kubitschek's administrations, a Brazilian version of the Developmental State was created, releasing the growth potential of the economy during the 1950s. The third section analyses the inflationary crisis and institutional inertia of the mid-1960s, and its solution through the introduction of a new of wave of institutional innovations and conflict management devices, which lead to the Brazilian growth miracle, until the debt crisis of early 1980s signaled its end. The fourth section analyses why the financial crisis, coupled with ineffective institutional changes and unsuccessful macroeconomic stabilization plans lead growth to a halt. It also includes an analysis of the pro-market reforms from the early 1990s onwards. The fifth section concludes the paper offering a brief sketch on how the analytical narrative fits the conceptual framework within which it was performed.
Topic:
Conflict Resolution, Development, and Economics
Political Geography:
Brazil and South America

89. Childhood Mortality and Economic Growth

Author:
Sonia Bhalotra
Publication Date:
07-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper investigates the extent to which the decline in child mortality over the last three decades can be attributed to economic growth. In doing this, it exploits the considerable variation in growth over this period, across states and over time. The analysis is able to condition upon a number of economic and demographic variables. The estimates are used to produce a crude estimate of the rate of economic growth that would be necessary to achieve the Millennium Development Goal of reducing the under-5 mortality by two-thirds, from its level in 1990, by the year 2015. The main conclusion is that, while growth does have a significant impact on mortality risk, growth alone cannot be relied upon to achieve the goal.
Topic:
Civil Society, Economics, and Human Welfare
Political Geography:
India

90. Institutionalism Ancient, Old and New: A Historical Perspective on Institutions and Uneven Development

Author:
Eric S. Reinert
Publication Date:
07-2006
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
This paper argues for an 'ancient' institutional school, predating Thorstein Veblen's 'old' institutionalism. In this view, going back as far as the thirteenth century, institutions tended to be seen as specific to a mode of production. Here both institutions and development itself are context-specific and activity-specific. Much clearer than today the arrows of causality of economic development go from the mode of production to the institutional setting, not vice versa. In order to understand development, institutions can also usefully be divided into Hayekian institutions that facilitate equilibrium and Schumpeterian institutions that enable the dynamics of development and structural change.
Topic:
Development, Economics, and Education