This study explores cross-regional interconnectedness, potential spillover effects, and the channels through which systemic risk is transmitted across financial institutions and macroeconomic factors in BRICS and Eurozone economies from 2005 to 2021. The aim is to deepen the understanding of systemic risk at a cross-regional level, highlight the pivotal role of institutions in shaping the broader systemic risk landscape, and uncover potential discrepancies arising from the differing economic structures, financial institutions, and macroeconomic policy frameworks of the BRICS and Eurozone regions. Using panel regression analysis and the Delta-CoVaR approach, this study models monthly data on selected systemic risk determinants for BRICS and Eurozone economies from 2005 to 2021. Our findings reveal that larger institutions in the Eurozone heighten the interconnectedness of systemic risk, triggering chain reactions that attract close regulatory scrutiny. Furthermore, Eurozone nations exhibit heightened systemic risk, exacerbated by the rapid transmission of financial turmoil. In the BRICS economies, accelerated growth rates attract substantial foreign investment, further intensifying systemic risk in their commodity-dependent markets. Policy recommendations from this study suggest that for a stronger risk management strategy, decisionmakers should consider the pivotal roles played by financial institutions and macroeconomic variables in spreading systemic risk within the BRICS and Eurozone regions.
This study explores the role of employment traits in explaining financial literacy using data from the Wave 5 of the South African National Income Dynamics Study for adults. The results show that being in employment relatively enhances financial literacy, including the components of financial literacy: interest rates, inflation, compounding and diversification. Being self-employed particularly shows up to exert positive and measurable influences on financial literacy, except for the top literacy where respondents give correct answers to all five financial literacy questions. The key lesson from the study is that self-employment, by inference entrepreneurship, is an important conduit of financial knowledge.
This study examines how prolonged participation in savings groups (SGs) impacts self-employment among people with disabilities. SGs, also known as village savings and loan associations (VSLA), provide their members with financial capital, social capital and more, which can potentially increase their chances of self-employment. This study uses current survey data on SGs in the iSAVE programme in Uganda, comprising responses from 14,260 individuals, of whom 72 percent report having some form of disability. Estimates from a variety of logistic regression models show that people with disabilities are 37.5 percentage points less likely to be self-employed. However, the interaction effect of prolonged participation in SGs increases the expected probability of self-employment among people with disabilities by 0.343, which corresponds to a 34.3 percentage point higher chances of starting a business or an income generation enterprise. While prolonged participation in SGs promotes selfemployment, we find that entrepreneurial role models within SGs accounts for a 19.3 percentage points increase in willingness for self-employment among people with disabilities. This highlights the critical importance and impact of role models in disabled communities, such as the iSAVE programme, in encouraging self-employment.
With insufficient documentation of infrastructure projects and limited empirical evidence, African governments have no scientific guidance on the choice between private-public partnerships (PPPs) and traditional (TP) infrastructure procurement. Under these circumstances, it is unclear whether their choices maximize value for money (VfM) on infrastructure projects. This paper sought to develop a framework for assessing VfM, establish the factors that drive VfM, and ascertain what stakeholders consider to constitute VfM, for TP and PPP projects. By deploying structural equation modelling technology, we find that technical (e.g., efficient project scoping) and financial (e.g., efficient risk allocation) factors are important for VfM on PPP projects, while political (e.g. efficient procurement process) and social (e.g. environmental impact considerations) factors play a more crucial role for TP projects. Thus, while stakeholders make judgments about VfM for PPP projects from a technical and financial standpoint, for government projects they use a political and social lens to make similar judgment. Interestingly, we also find that consistency of a project with national and local development goals is the single most important VfM indicator for both PPP and TP infrastructure projects
Across the globe, stock markets provide mechanisms for allocating funds from surplus units to deficit units, thereby offering numerous benefits to economic agents. Despite these benefits, the current low level of African stock market development inhibits the continent's growth. It hampers the rapid realisation of its potential, thereby compelling investigation into the factors that mitigate or motivate development in the stock market. Consequently, this paper evaluates the impact of national energy generation capacity on stock market development in Africa. The findings suggest that a reduction in the incidence of poor energy generation has a positive effect on stock market development. The empirical analyses also reveal that this relationship is more pronounced for Sub-Saharan African countries and African countries with low GDP per capita. In effect, by increasing power generation, countries in Sub-Saharan Africa can stimulate interest and participation in their stock markets. Our study contributes to the call for additional policy interventions to address the deplorable state of power generation and distribution across most of Africa.
We study how banking characteristics and their interaction with external shocks affect credit supply in West African Economic and Monetary Union (WAEMU) countries. A static and dynamic panel model is used on 66 banks between 2005 and 2021. The results show that capital, credit risk and securities portfolio inhibit lending activity, while liquidity favors its expansion. In addition, larger, more liquid and profitable deposit-taking banks are less affected by external shocks, while less capitalized banks are more sensitive. We recommend prudent management to ensure the sector's stability and resilience.
Recent geopolitical tensions have intensified, disrupting global financial interconnectedness and contributing to increased market fragmentation. This study examines the adverse effects of rising geopolitical risk on asset prices, explicitly focusing on housing, bonds, and global stock market indexes. We employ an Autoregressive Distributed Lag (ARDL) model to analyze these risks' short-term and long-term impacts using panel data from 55 emerging markets and advanced economies from 1990 to 2023. Our findings underscore the persistent negative influence of geopolitical risks on housing, bond, and local stock market return indexes, with emerging market economies experiencing more pronounced effects than advanced economies. While the longterm threat posed by geopolitical risks is significant, their short-term impacts are generally milder unless exacerbated by extraordinary events or crises, as evidenced in the aftermath of the global financial crisis. Additionally, during periods of heightened geopolitical risk, global factors-such as rising uncertainty, oil price fluctuations, and stock market volatility- amplify the adverse effects on these markets. In contrast, domestic factors show minimal influence, underscoring the dominant role of global dynamics in shaping these outcomes.
This paper examines the impact of the COVID-19 pandemic and the Russia-Ukraine war on the persistence of BRICS countries' 10- and 15-year bond yields using a fractional integration framework. The analysis spans three periods: pre-pandemic (2003- 2019), pandemic (until December 2021), and post-pandemic (until September 2023). The findings reveal no significant trends in 10-year yields across BRICS countries. Mean reversion is evident for Brazil in the pre-pandemic period, and for both Brazil and South Africa across the entire sample. South Africa shows a notable trend in 15-year bond yields, with shocks observed across all series. Policy implications are discussed.
Financial inclusion, defined as the widespread access and utilization of financial services by individuals and businesses, remains a recurring theme in development discussions due to its potential to alleviate poverty, enhance productivity, and promote equity. The interest of multilateral institutions and the wealth of information stemming from advancements in information and communication technologies have propelled empirical research primarily in urban areas, side-lining investigations in rural regions. Employing techniques of bibliometric analysis, this study unveils distinctions in the conceptual framework of financial inclusion, differentiating outcomes applicable to urban contexts from those pertinent to rural settings. Additionally, it identifies lingering theoretical and empirical gaps in research within both contexts, shedding light on prospective avenues for further investigation.
The 2015 Addis Ababa Action Agenda recognized the need for policies aimed at maintaining long-term debt sustainability. This paper describes a set of commonly used definitions of debt sustainability and shows that none of them focuses on long-term debt sustainability. It then discusses several practical and conceptual difficulties linked to assessing solvency in developing and emerging countries. Next, the paper asks whether countries default because they borrow too much or because investors think they will default, and this expectation becomes self-fulfilling. To answer this question, the paper uses a sample of 17 emerging market countries over 1970-2020 to build counterfactual debt levels under the assumption that these countries had continuous access to the international capital market without paying any premium over U.S. Treasuries. The exercise shows that most debt crises are not driven by solvency issues.
Corporate Social Responsibility (CSR) and social impact are two fundamental pillars of companies' strategy. However, the extent to which these two dimensions affect market performance remains understudied in emerging economies. To fill this gap, this paper examines the relationship between CSR and social impact in the oil industry in an emerging market (Peru). Using an adequate case study approach, together with financial data analysis, and the information provided by companies' annual reports and CSR reports, our results show that the expected positive relationship varies depending on many diverse factors. Specifically, to achieve social impact, companies must prioritize community and environmental responsibility, as well as stakeholder engagement. Nevertheless, we found that businesses struggling with any of these aspects either completely or partially reject social impact. Our findings have some important ramifications for policymakers as well as managers in the oil sector. This issue is especially relevant in emerging economies like the Peruvian one since they are highly dependent on raw materials exports, which ultimately affects not only the environment but also the local communities.
This paper extends an established finding: that institutions are important for foreign direct investment (FDI). Our results show that institutions are both more and less important than previous empirical results suggest. This is because the concentration of FDI in a location matters. Theoretically, if institutions serve a risk-mitigating role, then rising locational concentration of FDI compromises the risk diversification function that multiple locations for FDI provides. This can be offset by high-quality institutions. The implication is that the impact of institutions on FDI will be enhanced with rising FDI concentration. Empirically, we examine the locations of outward FDI from South Africa from 1996-2019, confirming the presence of a strong association between FDI and an institutions-FDI concentration interaction term. The result is robust to many alternative means of measuring institutions and to a number of alternative means of representing the implied nonlinearity in estimation. The inference is that for any location that is intent on attracting strong concentrations of FDI inflows, the general precept that sound institutions are important in attracting FDI flows is enhanced, both in terms of the strength of institutional improvement, and the breadth of institutions that require attention.
Focusing on the developing economy of Saudi Arabia, this study examines the impact of financial self-efficacy on the relationship between financial literacy and financial inclusion in the demand-side context. Using a quantitative approach, the study presents the first account of this relationship as it functions in the focal country. The association between financial literacy and financial inclusion is investigated on a quantitative basis via multiple hypotheses tested with partial least-squares structural equation modeling (PLS-SEM) as the methodology. The investigation is based on quantitative data collected from 887 respondents randomly selected using an online survey questionnaire designed specifically for this study. A significant positive relationship is found between financial literacy and financial inclusion. In particular, self-efficacy is identified as a significant predictor of financial inclusion and a partial mediator between financial literacy and financial inclusion.
The purpose of this research is to find a relationship between compliance with the principles of good Corporate Governance and the performance of the shares of companies in the mining sector that are listed on the Lima Stock Exchange. The considered time period goes from June 2013 to June 2018. Two portfolios called TIR 1 and TIR 2 were assembled according to the number of principles fulfilled to separate the companies with the highest compliance, TIR 1, from the companies with the lowest TIR 2 compliance. The Carhart four-factor method has been applied. The results showed that the TIR 1 portfolio is superior in performance of the shares compared to the TIR 2 portfolio, which we could comment that there is a relationship between compliance with good practices and the returns of these companies in the sector studied.
We first investigate the association between digitalization and CO2 emissions to evaluate the validity of the Environmental Kuznets Hypothesis. Our findings confirm the presence of an inverted U-shaped relationship, indicating that digitalization initially leads to an increase in CO2 emissions until a certain threshold is reached, beyond which carbon emissions begin to decline. Consequently, countries should adopt distinct policies to mitigate carbon emissions as they undergo the process of digitalization. Subsequently, we explore whether high levels of financial development influence the inverted U-shaped relationship between digitalization and CO2 emissions. While the results suggest that financial development may contribute to reducing emissions in less digitally advanced countries, its impact appears to be less significant in highly digitalized nations.
This paper examines the effect of aid fragmentation on the aid-growth nexus in Sub-Saharan Africa from 1990-2017. Aid fragmentation is measured by both the concentration index (Herfindahl index and ratio of contribution by largest three donors) and donor counts (total number of donors and number of small donors). We find a significant negative effect of aid fragmentation on the effectiveness of aid to stimulate economic growth based on the concentration index. We did not find any significant relationship between aid fragmentation and aid effectiveness when we employed the instrumental variable approach. The results point to a positive impact of the economic policy environment in the recipient countries on economic growth. The policy environment and the level of aid fragmentation in the recipient countries are found to have a combined positive moderating effect on the aid-growth nexus.
The interplay between FDI inflows, energy consumption and environmental pollution stems from the pollution haven hypothesis (PHH). These relationships were examined by analysing panel data for 21 sub-Saharan African (SSA) countries from 1990-2016. More FDI inflows were found to worsen environmental pollution. However, when linked with relative income, more FDI inflows tended to lessen environmental pollution. Consequently, the existence of the PHH could not be unequivocally confirmed in SSA. The level of economic growth was also examined to assess the impact on environmental pollution. The validity of the Environmental Kuznets Curve (EKC) hypothesis was confirmed with an N-type relationship.
Are crypto-assets resilient to rising uncertainties and geopolitical tensions? This article aims to examine the impact of economic uncertainties and geopolitical risks on crypto-assets performance. To do so, we mobilize data on the returns of 105 crypto-assets from January 2019 to December 2023.Our results highlight that uncertainties negatively and significantly affect the performance of crypto-assets. Moreover, crypto-asset returns are sensitive to geopolitical tensions (regardless of the threat or its execution). Overall, we provide unique evidence of the impact of uncertainties and geopolitical risks on crypto-asset market performance.
Using a large panel of data from 3446 banks located in the euro area over the period 2009-2018, this paper aims to shed further light on the question: How does bank capital ratio influence lending behavior? Our results suggest a negative impact of the capital increase on the banks' loan supply. However, this impact seems to be smaller during the period of implementation of negative interest rates. Moreover, we observe that this effect is influenced by banks' characteristics, such as size and dependence on deposits. Indeed, we highlight that the reduction in banks' lending supply was more important for small banks and for those highly dependent on deposits. We complete our analysis by using a theoretical micro-model of bank intermediation. The predictions of the model show that the increase in capital will induce banks to lend less through an increase in the screening of loan applicants and an increase in the cost of credit for those applicants who pass the screening.
Credit risk has been associated with systemic instability, as illustrated by notable crises such as the Asian fiscal crisis of 1997 and the global financial crisis of 2007-2008. This study empirically investigates the macroeconomic drivers of credit risk for BRICS countries using quarterly data for the period 2000 - 2021. To examine this relationship, a Markov Switching Model is employed. The results show that slower economic growth, rising inflation, an appreciating currency, and higher interest rates are associated with rising credit risk. The results also demonstrate that the effects of these macro determinants are not homogeneous across different regimes.
