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Determinants of Financial Inclusion in Nigeria: The Monetary Policy and Banking Sector Factors
No full textThis study investigates the determinants of financial inclusion in Nigeria. The study extends the empirical debate on the determinants of financial inclusion by focusing on the monetary policy and banking sector factors that influence the level of financial inclusion in Nigeria. The study employs the two-stage least squares regression method to estimate the determinants of financial inclusion in Nigeria during the 2007–2021 period. The results show that the central bank monetary policy rate, the savings deposit rate, and the loan to deposit ratio of banks are significant determinants of financial inclusion in Nigeria. Specifically, increase in the central bank interest rate decreases the level of financial inclusion, increase in the savings deposit rate increases the level of financial inclusion, and increase in the loan-to-deposit ratio decreases the level of financial inclusion. These determinants are robust to alternative estimation using the quantile regression method. There is further evidence that the interbank lending rate, inflation rate and the nominal interest rate are also determinants of financial inclusion in Nigeria based on the two-stage least squares estimation
Digital finance and future of banks and financial services
No full textDigital finance is revolutionizing the financial sector in significant ways. Its role in shaping the future of banks and financial services is a topic of widespread interest in the policy and academic literature. This study examines the role of digital finance in shaping the future of banks and financial services. The study shows that digital finance innovations are disrupting banking and the nature of financial services. Financial institutions that will survive in the future must undertake digital transformation to compete for market share in new customer segments and to meet the changing needs and preferences of customers. While nobody knows for sure what the future of banking and financial services will be in the distant future, it is certain that the digital finance revolution would change the face of banking and financial services in the future. Regulation, technology, and geopolitical factors could alter the future of banking and financial services
What Explains the Greening of China's Energy ODI? The Role of Environmental Regulation, Endowments and Financial Factors
No full textIn the current study, we document a steady rise in the share of renewable energy projects in China's outward direct investment (ODI) in the energy sector. We examine the driving forces and find that both host country's environmental regulation and financial factors has generated different or even opposite effects on China's ODI in fossil fuels and renewable energy. Specifically, China's ODI in fossil fuels is positively correlated with endowments in fossil fuels, electricity consumption, low financing costs, and high exchange rate volatility. In comparison, ODI in renewable energy is more likely to occur in host countries with stricter environmental regulation and less likely to be impeded by tighter monetary policy. The results suggest that the combination of regulatory policies and financing conditions can have an important influence in the global transition to renewable energy
Incremental Innovation by Heterogeneous Incumbents and Economic Growth: relationship between two sources of growth
No full textIn this paper, we construct a tractable endogenous growth model that incorporates both incremental innovation by heterogeneous incumbents and innovation by entrants.
Our model features two endogenous sources of growth: quality improvement (vertical growth) and expansion in the variety of goods (horizontal growth).
We then examine the policy effects of a subsidy for incremental innovation by incumbents and a subsidy for innovation by entrants on the overall economic growth rate, as well as on the relationship between the two sources of growth.
Our model confirms that incumbents with higher profit flows tend to engage in incremental innovation for a longer duration and incur greater innovation costs,
which is consistent with both Schumpeter's hypothesis and the findings of Christensen (1997)
Additionally, the model generates counterintuitive results that are not commonly found in the conventional literature.
First, a subsidy for incremental innovation by incumbents may reduce the entry of new firms.
Second, a subsidy for innovation by entrants may have a negative effect on the overall economic growth rate
An Introduction to Natural Disaster Economics
No full textThe fires in Los Angeles ignited in January 2025. I will use this shock to sketch out my main themes as I will explore the microeconomics of natural disasters as I focus on the causes and consequences of extreme weather events; including hurricanes, tornadoes, wildfires, extreme heat, and pollution spikes. I will ask (and sketch answers to) some tough questions: Why do these shocks cause damage? Why weren’t people, firms, and governments prepared for such shocks? What does it mean “to be ready”
Patent Policy at a Tipping Point: Why Stronger Patent Protection May Not Foster Economic Growth
No full textAccording to the available evidence, stronger patent protection exerts, at best, a modest positive effect on economic growth. Different variants of Schumpeterian growth models predict a wide range of outcomes, from strongly positive to strongly negative effects. We propose a Schumpeterian growth model with endogenous innovation scale, a generalized innovation function that combines R&D lab-equipment and labor-embodied technical knowledge, and a complexity-of-innovation effect. Consistent
with the evidence, plausible calibrations of the model suggest that a typical OECD economy lies near the peak of an inverted-U-shaped curve, where the effect of stronger patent protection on growth is close to zero. In some cases, this effect may even be negative
Automation, Economic Growth, and Wage Inequality: A Comment on Afonso (2024)
No full textThis study critically reviews Afonso (2024), who proposes a model of economic growth that considers automation capital, traditional capital, skilled labor, and unskilled labor. In his definition of a balanced growth path, the progress of automation makes both the ratio of skilled labor to all labor and the skill premium asymptotically approach zero in the long run. Eventually, the economic growth rate becomes zero, which contradicts his conclusion. In contrast, if we correct the definition of the balanced growth path, the ratio of skilled labor to all labor asymptotically approaches unity in the long run, and the skill premium diverges to infinity. In this case, the long-run growth rate of per-capita output is equal to the growth rate obtained from Jones’s (1995) semi-endogenous growth model
Nexus between Financial Liberalization and Financial Market Performance: A Testing of Convergence Hypothesis
No full textThis paper investigates the impact of financial liberalization, economic growth, and political instability on financial market performance from 1990 to 2021. The dependent variable is financial market performance, while financial liberalization, economic growth, and political instability are treated as independent variables. Monetary and fiscal freedom are included as control variables. The study employs various empirical methods, including descriptive statistics, correlation matrices, panel least squares, and panel autoregressive distributed lag models. Monetary freedom exhibits a statistically insignificant negative effect on financial market performance. In contrast, fiscal freedom shows a strong negative correlation with financial market performance. Financial liberalization has a statistically significant positive effect on financial market performance. Economic growth also exerts a substantial positive impact on financial market performance. Political instability, however, has a statistically significant negative influence on financial market performance. These findings lend support to the convergence hypothesis. Policymakers must strike a balance between regulatory intervention and market autonomy. This can be achieved by implementing policies that promote fiscal freedom, eliminate unnecessary constraints on economic activity (particularly in the financial sector), and encourage greater financial sector openness. Additionally, policies should prioritize economic growth through investment promotion, support for innovation, facilitation of entrepreneurship, and infrastructure development
Aging and its macroeconomic consequences: An inverted U-shaped endogenous economic growth
No full textThis study theoretically analyzes population aging and its impacts on economic growth, wealth inequality, and fiscal sustainability. We introduce lifetime uncertainty to the overlapping generations model with heterogeneous households with varied intertemporal preferences, where unintended bequests caused by death are inherited by offspring. Aging can have both positive and negative impacts on economic growth and fiscal sustainability: saving-enhancing effects based on the life cycle theory and wealth-depletion effects caused by extended longevity. When aging advances, saving-enhancing effects are offset by wealth-depletion effects, which eventually outweigh the former. The results show an “inverted U-shaped” relationship between life expectancy and economic growth rate, or fiscal sustainability. Numerical simulation reveals that aging can produce a trade-off between economic growth and wealth inequality. We also show that a rise in deficit or government expenditure ratios exacerbate fiscal instability, economic growth, and wealth inequality under certain conditions
Forecasting economic downturns in South Africa using leading indicators and machine learning
No full textWe identify South African business cycles using the algorithm of Bry-Boschan and show that the identified turning points are very similar to those from other approaches. We demonstrate that South Africa has a very volatile business cycle that makes it particularly difficult to predict turning points in the economic cycle. South Africa’s business cycle is characterised by relatively long downswings and short upswing phases with low amplitude. We find that the South African Reserve Bank (SARB)’s Leading Indicator does not substantive improve predictions of the business cycle relative to GDP itself. We assess the performance of a range of potential leading indicators in identifying economic downturns and consider whether alternative indicators and estimation approaches can
produce better predictions than those of the SARB. We demonstrate that using a larger information set produces substantially better business cycle predictions, especially when using machine learning techniques. Our findings have implications for the creation of
composite leading indicators, with our results suggesting that many of the macroeconomic variables considered by analysts as leading indicators do not provide good signals of GDP growth or developments in the South African business cycle