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1. Financial Sector Structure and Financial Crisis Burden: A Model Based on the Russian Default of 1998

Author:
George Mavrotas and Dmitri Vinogradov
Publication Date:
06-2005
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
We consider an overlapping generations model with two production factors and two types of agents in the presence of financial intermediation and its application to the Russian default of August 1998. The paper focuses on the analysis of the consequences of a sudden negative repayments shock on financial intermediation capacity and consequently on the economy as a whole. The model exhibits a 'chain reaction' property, when a single macroeconomic shock can lead to the exhaustion of credit resources and to the subsequent collapse of the whole banking system. To maintain the capability of the system to recover, regulatory intervention is needed even in the presence of the state guarantees on agents' deposits in the banks (workout incentives). We compare the results for an intermediated economy with those derived under the assumption of a market economy, and draw some broad conclusions on the consequences of the crises, which are contingent on the financial sector structure.
Topic:
Development, Economics, Emerging Markets, and International Trade and Finance
Political Geography:
Russia

2. Aid Disaggregation, Endogenous Aid and the Public Sector in Aid-Recipient Economies: Evidence from Côte d'Ivoire

Author:
George Mavrotas and Bazoumana Ouattara
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The present paper examines the impact of different aid types, namely project aid, programme aid, technical assistance and food aid on the fiscal sector of the aid-recipient economy by using time-series data for Côte d'Ivoire over the period 1975–99. Empirical results obtained by estimating correctly the solution of the theoretical model show that when a single value (or aggregated) for aid is used, foreign aid is fully consumed in the case of Côte d'Ivoire. However, results obtained under the assumption of aid heterogeneity clearly suggest that the government responds differently according to the nature of the aid inflows. Our approach sheds plenty of light on how the aid-recipient government reacts to different categories of foreign aid inflows and the empirical findings clearly demonstrate the importance of the aid disaggregation approach for delving deeper into aid effectiveness issues.
Topic:
Development, Economics, Emerging Markets, and Non-Governmental Organization
Political Geography:
Africa

3. Financial Sector Development — Futile or Fruitful? An Examination of the Determinants of Savings in Sri Lanka

Author:
George Mavrotas and Roger Kelly
Publication Date:
02-2003
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, Emerging Markets, and International Trade and Finance
Political Geography:
South Asia

4. Financial Sector Reforms and Savings Mobilization in Zambia

Author:
George Mavrotas and Samuel Manzele Maimbo
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The paper explores the relationship between financial sector reforms and savings mobilization in Zambia. Although there exists an extensive literature on financial sector development and savings levels in developing countries, there does not seem to exist satisfactory work on the above nexus for sub-Saharan African countries, particularly Zambia. Along these lines, the paper examines the linkages between the financial reforms of the early 1990s and savings mobilization. It considers the characteristics of banks and non-bank financial institutions, especially micro finance institutions, and savings levels and identifies problems associated with the relatively poor performance of savings in recent years and concludes with a set of policy guidelines for strengthening savings mobilization, highlighting the expected effect on povertyreducing growth.
Topic:
Development, Economics, Emerging Markets, and International Trade and Finance
Political Geography:
Africa and Nordic Nations

5. Savings and Financial Sector Development: Panel Cointegration Evidence from Africa

Author:
George Mavrotas and Roger Kelly
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
The paper uses different measures of financial sector development for a dynamic heterogeneous panel of 17 African countries to examine the impact of financial sector development on private savings. An innovative econometric methodology is also employed related to a series of cointegration tests within a panel. This is an important contribution since traditional panel data analysis adopted in previous studies suffers from serious heterogeneity bias problems. The empirical results obtained vary considerably among countries in the panel, thus highlighting the importance of using different measures of financial sector development rather than a single indicator. The evidence is rather inconclusive, although in most of the countries in the sample a positive relationship between financial sector development and private savings seems to hold. The empirical analysis also suggests that a change in government savings is offset by an opposite change in private savings in most of the countries in the panel, thus confirming the Ricardian equivalence hypothesis. Liquidity constraints do not seem to play a vital role in most of the African countries in the group, since the relevant coefficient is negative and significant in only a small group of countries
Topic:
Development, Economics, Emerging Markets, and Poverty
Political Geography:
Africa

6. The Composition of Aid and the Fiscal Sector in an Aid-Recipient Economy: A Model

Author:
George Mavrotas and Bazoumana Ouattara
Publication Date:
02-2003
Content Type:
Working Paper
Institution:
United Nations University
Abstract:
Building on recent work in the fiscal response literature, the present paper develops a new fiscal response model, which, for the first time in the relevant literature, combines the ideas of both endogenous and disaggregated aid. We endogenized aid on the grounds that the recipient government has some influence over aid disbursements. Regarding aid disaggregation, it is argued that each of the main four categories of aid, namely project aid, programme aid, technical assistance and food aid may exert different effects on the recipient economy. Furthermore, in case the preferences of the aid-recipient government are higher for some of these types of aid, neglecting aid disaggregation would lead to aggregation bias in the results and conclusions. The model adds an important new dimension to the vast aid effectiveness literature and calls for further modelling as well as empirical work in this promising research area so that significant policy implications can be derived.
Topic:
Development, Economics, Emerging Markets, Non-Governmental Organization, and Poverty