Credit In Countries Research Articles

The role of legal system in SME bank credit in ASEAN

This study aims to investigate the role of legal system in the access to bank credit of small and medium enterprises (SMEs) and explores the measures to improve legal system among the Association of South-East Asian Nations (ASEAN). By applying the ordinary least squares (OLS) method, the study examines the bank credit accessibility of over 12,000 firms across eight ASEAN countries, using the data collected from the World Bank’s Business Environment and Enterprise Performance Survey (BEEPS), in relation to each country's contract enforcement indicators. The estimated results reveal a significant positive relationship between contract enforcement and SMEs’ access to bank credit. Furthermore, the results show that long time consumption and large costs for contract enforcement reduces financing opportunities of SMEs. Additionally, the study finds that a country’s legal tradition does not impact the effectiveness of its contract enforcement. Implementing electronic filing systems and limiting times and costs for legal processes can enhance contract enforcement. Consequently, strong contract enforcement appears to encourage banks to increase SME lending, leading to higher SME bank credit in countries with efficient contract enforcement mechanisms. Enhancing contract enforcement can increase SME financing and consequently, will improve a country’s financial intermediation. These findings underscore the importance of contract enforcement including its duration and cost, in the context of SME financing and suggest ways to improve a country’s legal system to foster SME access to bank credit.

Analysis of the Causal Relationship between Money Supply, Foreign Reserves and Bank Credit in Oil Countries: Evidence from Iraq

This study investigates the causal relationships among money supply, foreign reserves, and bank credit in Iraq, a major oil-producing economy. Understanding these interconnected variables is crucial for effective monetary policy formulation and macroeconomic stability. this study employs the Toda-Yamamoto approach to Granger causality testing and quarterly data spanning from 2004 to 2022 to capture the dynamics following the Iraq War and explore the post-conflict economic landscape. Granger causality tests are conducted to determine the direction of causality among the variables. Impulse response functions and variance decompositions provide insights into the magnitude and persistence of shocks, shedding light on the relative importance of each variable in influencing the others. The empirical findings reveal a bidirectional causal relationship between money supply and foreign reserves, indicating that changes in one variable significantly influence the other. Additionally, a unidirectional causality is observed, running from foreign reserves to bank credit, highlighting the significance of foreign exchange reserves in facilitating bank lending. However, no causal link is detected between money supply and bank credit, suggesting that monetary policy may have limited direct impact on credit expansion in Iraq’s banking sector. These results have important policy implications for the Central Bank of Iraq in managing monetary policy tools and navigating the challenges of an oil-dependent economy. The study contributes to the literature on monetary economics in resource-rich countries and provides valuable insights for policymakers and researchers alike.

Роль инструментов Банка России в современном российском государственном управлении

The present paper examines the political and economic role of the Bank of Russia in the structure of public administration, studying its impact on the country’s economy and the welfare of the population. It argues for the idea that the Bank of Russia’s key rate is used as a tool for achieving domestic policy objectives, such as con-trolling inflation, stimulating economic growth and supporting financial stability. It is noted that the key rate of the Bank of Russia is used by it as a tool to achieve domestic political goals, such as controlling inflation, stimu-lating economic growth and supporting financial stability. As a foreign policy tool, it is a means of soft power, especially in the context of global financial markets, where global actors are largely guided by the actions of the Bank of Russia. The results of the analysis of academic research, theoretical models and practical examples related to the policy of the Bank of Russia and its impact on the country’s economy are presented. In addition, the experience of application of key rate instruments by credit and financial institutions in other countries is also considered. Conclusion dwells upon the fact that the results of the study are of great importance for the devel-opment of effective economic policy of the state and making informed decisions in the sphere of monetary policy.

Global banking, financial spillovers and macroprudential policy coordination

AbstractThe transmission of financial shocks and the gains from international macroprudential policy coordination are studied in a two‐region, core–periphery model with a global bank, a two‐level financial structure and imperfect financial integration. The model replicates the stylized facts associated with global banking shocks, with respect to output, credit, house prices and real exchange rate fluctuations in recipient countries, as documented empirically. Numerical experiments, based on a parametrized version of the model, show that the gains from coordination increase with the degree of financial integration, which raises the scope for spillback effects from the periphery to the core, through trade and private capital flows. However, even when coordination is Pareto‐improving, the resulting gains may be highly asymmetric across regions.

Looking for asymmetries between credit and output in the BRICS countries

This article aims to investigate the role of household domestic credit on GDP in the BRICS countries, controlling for other variables, such as inflation, government spending, GFCF, and interest rate. The econometric methodology involves the estimation of Nonlinear Autoregressive Distributed Lag (NARDL) models with Bounds Testing Approach to Cointegration, for quarterly data ranging from 2008Q3 to 2019Q4. The estimations indicate that household domestic credit and GDP, together with the control variables, have a common long-run path (cointegrate) in each country analyzed. But the long-run coefficients show that only in Brazil, Russia and China increases in household credit lead to a growth in output. As for short-run perturbations, it takes approximately two quarters, on average, for such shock to dissipate and the long-run equilibrium level to be restored. The asymmetric adjustment paths show a positive asymmetric case in Brazil and South Africa, but a negative asymmetry in Russia and India. For the Chinese case, the adjustment is symmetric. The evidence from Toda and Yamamoto’s Granger Causality tests between GDP and household domestic credit reveals China is the only case of bicausality. South Africa shows no sign of Granger-causality, while Brazil shows that household credit Granger-causes GDP, but not the opposite. In the case of Russia, GDP Granger-causes household domestic credit.

Macroeconomic Determinants of Credit Risk: Evidence on the Impact on Consumer Credit in Central and Eastern European Countries

Although empirical studies show that different types of loans have different risks (moreover, consumer credit risk is higher compared to other types of loans), it is common to study the credit risk of the banking sector as a whole, or of an individual bank’s whole loan portfolio, and the macro-economic factors affecting it (without grouping them by type of loan). Thus, an analysis of the credit risk of the whole loan portfolio (measured by all non-performing loans) is insufficient. Therefore, the aim of this research is to identify the macroeconomic determinants of the consumer loan credit risk and quantitatively assess their impact in Central and Eastern European countries. After the analysis of scientific literature in the field of credit risk determinants, a detailed classification of factors influencing banking credit risk is proposed. The distinguishing feature of the classification is that the factors influencing credit risk are classified at five different levels; twelve groups of general macroeconomic conditions variables were selected as the potential factors of NPLs. This classification can be useful to better understand and investigate the factors influencing banking credit risk for the whole loan portfolio (in the same way as the factors that affect the credit risk of different types of loans, e.g., consumer loans). Using the methods of constant, fixed and random-effects panel analysis, simple OLS, least squares with breakpoints regression analysis and Markov regime-switching models, the impact of the macroeconomic variables from twelve separate groups is evaluated. The data from 11 CEE countries are used, and the period from 2008 to 2020 is covered. The results of this assessment reveal that in the group of CEE countries, such variables as GDP and labour market variables appeared to have contributed to the increase in the share of non-performing consumer loans, while inflation and real estate market variables were related to the decrease in consumer NPLs; at the same time, the impact of variables form other groups appeared to be mixed-nature or insignificant. The results of this research are useful in that they allow the identification of the most important determinants of consumer loan credit risk and thus allow making assumptions about NPL changes due to the changing macroeconomic situation. In the case of Lithuania, this kind of study (assessment of macroeconomic determinants of consumer loan credit risk) was conducted for the first time. Consumer loan credit risk assessment is especially relevant in an increasing interest rate environment, and deeper analysis can help banks and other financial institutions to manage credit risk. On the other hand, a better understanding of the main influencing factors of the macroeconomic environment can help central banks and other official institutions take appropriate monetary and fiscal policy decisions to ensure a good credit transmission channel for sustainable economic growth.

One size may not fit all: Financial fragmentation and European monetary policies

AbstractThis article investigates the impact of European Central Bank policies on credits considering financial and banking fragmentation. Using European data from the past decade, we estimate SVAR models to analyze the regional impact of conventional and unconventional measures on price and volume indicators of fragmentation. The risk‐taking channel is studied using GVAR models to document the national consequences of this fragmentation. We find that unconventional measures increase credit in peripheral countries. Monetary policies alleviate fragmentation, but mostly in terms of price dispersion rather than credit volume. Finally, unconventional measures imply a rebalancing of European bank assets in favor of foreign currency denominated‐assets.

Demand and supply constraints of credit in smallholder farming: Evidence from Ethiopia and Tanzania

Credit constraint is often considered as one of the key barriers to the adoption of modern agricultural technologies and low agricultural productivity in low- and middle-income countries. Past research and much of the policy discourse associate agricultural credit constraints with supply-side factors, such as limited access to credit sources or high costs of borrowing. However, demand-side factors, such as risk-aversion and financial illiteracy among borrowers could also affect credit-rationing of smallholder agricultural households. This study investigates the nature of credit constraints, factors affecting credit constraint status, and the effects of credit constraints on adoption and intensity of use of three modern agricultural technologies – small-scale irrigation, chemical fertilizer, and improved seeds. The paper also assesses whether credit constraints are gender-differentiated. Primary survey data were collected from sample farmers in Ethiopia and Tanzania, and Tobit and two-step hurdle econometric models were used to analyze these data. Results show that demand-side credit constraints are as important as supply-side factors in conditioning smallholders’ access to credit in both countries. We also find that credit is a binding constraint for the decision to adopt technologies and input use intensity in Tanzania but not statistically significant in Ethiopia. Results suggest that women are more likely to be credit constrained (from both the supply and demand sides) than men in both study countries. Based on these findings, we suggest that policies should focus on addressing both supply- and demand-side credit constraints to credit access, including through targeted interventions to reduce risk, such as crop insurance, and to strengthen the gender sensitivity of credit policies.

Private credit in dual banking countries: Does bank ownership type matter?

AbstractThis study investigates how the effects of government and foreign bank ownership on private credit vary in the cases of Islamic and conventional banks using data extended from Claessens and van Horen (2014) of 29 dual banking countries from 1995 to 2017. In support of the political view of financial development, we find that the presence of state‐owned Islamic banks seem to be slightly less harmful to private credit flows than their conventional peers, particularly in the period after the global financial crisis. We also document evidence showing that countries with a larger foreign Islamic bank presence tend to have deeper credit markets postcrisis. However, such advantages may often be outweighed by the costs associated with increased penetration by foreign conventional banks.

Heterogeneous Global Booms and Busts

We investigate the heterogeneous boom and bust patterns across countries that emerge as a result of global shocks. Our analysis sheds light on the emergence of core and periphery countries, and the joint determination of the depth of recessions and tightness of credit across countries. The model implies that interest rates are similar across core and periphery countries in booms, with larger credit and output growth in periphery countries. However, a common global shock that leads to a credit crunch across the globe gives rise to a sharper spike in interest rates and a deeper recession in periphery countries, while a credit flight to the core alleviates the adverse consequences in these countries. (JEL E21, E32, E43, E44, F44, G01, G15)

Assessment of Factors Determining the Level of Private Credit in European Union Countries

Abstract This paper aims to evaluate the factors determining countries’ private credit level as well as to identify the differences of their effect during the periods when the levels of country private credit exceeded 100 percent of GDP or were below. The research methodology relies on two modifications of the multiple regression model with log differences of variables. Research results showed a negative impact of economic growth and a positive impact of consumer prices and housing prices on the level of private credit. It has also been found that in the first period when the level of private credit to GDP exceeds the 100 per cent threshold households tend to borrow more than in other periods. In the second model distinguishing between periods when the level of country’s private credit was below 100 per cent of GDP and when this level was reached or exceeded the research showed that the effects of economic growth do not differ between periods of high and low indebtedness, but the difference becomes apparent when assessing the impact of household income and expenditure, thus confirming the impact of the marginal financial depth.

The Impact of the COVID-19 Pandemic on the Consumer Credit Market in Eurozone Countries

Theoretical background: The problem of the impact of the pandemic on the consumer credit market in Eurozone countries is important both from a cognitive point of view and from the perspective of economic practice. The current state of knowledge on the consumer credit market situation in Eurozone countries is incomplete. It is more common to find works concentrating on the effect of the pandemic on the consumer credit regulations, on the banking sector, or on evaluation of the consumer credit market situation in selected Eurozone countries, selected European countries or Europe as a whole. As a result, many accounts of the impact of the pandemic on consumer credit can be found, but there are no studies presenting the situation of the consumer credit market in Eurozone countries during COVID-19 in a comprehensive and integrated manner, simultaneously combining theoretical aspects and research results. Purpose of the article: This study has two objectives. The main objective was to examine the impact of the COVID-19 pandemic on the value of consumer credit in Eurozone countries. The specific objective was to examine the dynamics and directions of changes in the value of consumer credit during the pandemic in the Eurozone. The study hypothesis is that COVID-19 has determined the amount of household consumer credit debt in Eurozone countries, but that the determinants of this debt and the direction and strength of their impact are diverse. Research methods: The achievement of the objectives and hypothesis verification was based on a critical analysis of source texts and on quantitative research, in which time series analysis and multiple linear regression analysis were used. Main findings: It has been proven that the pandemic has influenced the tendency of households to take out credit, as well as the propensity of banks to grant credit, and that it therefore has affected the behaviour of both borrowers and lenders. We also showed that in periods of increased COVID-19 transmission, there was a low propensity for using credit, while in periods of relative suppression of COVID-19 symptoms, this tendency increased. It also has been proven that COVID-19 has unevenly affected the value of loans across countries. A significant difference was observed in the strength of the impact of individual independent variables on the value of consumer credit in the Eurozone, as well as a different direction of correlation between the variables. Moreover, significant differences were found in the number of variables influencing the value of consumer loans in individual Eurozone countries.

Does bank competition matter for the effects of macroprudential policy on the procyclicality of lending?

Competition is an inherent and natural environment in which banks operate and extend loans. Despite the extensive debate on the impact of bank competition on risk-taking and procyclicality, there is no evidence of its role in the effects of macroprudential policy on loan growth and on the sensitivity of lending to the business cycle. Using over 80,000 bank-level observations in 95 countries from 2004 to 2015, we find that increased competition strengthens the countercyclical effects of macroprudential policy instruments (MPIs) in terms of reduced loan growth. Bank lending is procyclical in a perfectly competitive industry. However, any decrease in the intensity of competition in countries not applying MPIs is related to the increased procyclicality of lending. The sensitivity of lending to the business cycle in countries implementing macroprudential policy depends on the type of MPI and the length of use of the instruments. We demonstrate that an extended duration of use of cyclical instruments is associated with increased procyclicality in lending. In a perfectly competitive environment, we find increased procyclicality of credit in countries using cyclical instruments for longer periods, and decreased procyclicality of credit in countries applying balance-sheet-oriented instruments. Under the imperfectly competitive banking sector, we find the opposite effects of macroprudential instruments on the procyclicality of credit.

Is financial development beneficial to improve the efficiency of green development? Evidence from the “Belt and Road” countries

With the deepening of “the Belt and Road” (B&R) construction, green development has become a consensus. Financial backing is considered essential both in political and economic perspectives to promote sustainable transaction. One preliminary issue worth an investigation is whether financial development is conducive to green development in the “Belt and Road Initiative” (BRI) countries. To answer this question, we construct a model in this thesis to discuss the impact of financial development on the efficiency of green development from three dimensions (financial size,11The “financial size” in this paper refers to the scale of bank's credit in the BRI countries. Specifically, it is measured by the scale of bank's credit (% of GDP). financial efficiency, and financial deepening). To synthetically measure the efficiency of green development, this thesis promoted Green-Total Factor Productivity (G-TFP) based on the panel data of 51 BRI countries from 2005 to 2017. Results demonstrate that: (1) The financial development of BRI countries exert a negative effect on the efficiency of green development in the aspects of financial size, financial deepening and financial efficiency in the course of the sample period. (2) This paper further confirms the heterogeneity of the effect of financial development on the efficiency of green development considering the various characteristics (eg. Resource endowment, level of financial development, institutional quality and industrialization stage.) among BRI countries. (3) This paper finds evident that financial development affects the efficiency of green development through different paths. According to the results of the PLFC (partial linear functional-coefficient) model, the influence of financial development on technological progress, changes with income. The empirical results of this article are instructive when the “Belt and Road” countries fully participate in the great vision of “carbon neutrality”.

Banking sector credit, inflation and growth in sub-Saharan African countries

The banking sector in the past decade has been known to play a germane role in the development of any economy through its financial intermediation function. However, the financial intermediation of banks which is a major prerequisite for growth can be hindered by inflation. This study examines the effect of banking sector credit on inflation and growth in thirty-five sub-Saharan African economies for the periods 2000 and 2016. The panel vector error correction model (PVECM) technique was employed in analyzing the data. The study outcome indicates that banking sector credit affects inflation positively and growth negatively in SSA economies. Besides, the study found a bi-directional causality between banking sector credits and inflation. Hence, the government in sub-Saharan Africa countries should continue to design and implement an appropriate monetary policy to ensure optimal bank credit that will enhance growth in the region while keeping inflation level under control. The study also recommends the need for financial sector policy reform that will promote fiscal discipline, deepen the financial market, enhance credit availability, and keep inflation under control.

International evidence on state ownership and trade credit: Opportunities and motivations.

Recent events, most notably the Global Financial Crisis and the COVID-19 pandemic, have made it increasingly apparent that liquidity is synonymous with corporate survival. In this paper, we explore how governments can fulfill an important need as suppliers of liquidity. Building on the financing advantage view of state ownership, we theorize how state-owned enterprises (SOEs) may provide capital by offering trade credit to customer firms. The data indicate a positive relation between the level of state ownership and the provision of trade credit. Using an institution-focused framework, we further determine that the nation’s institutional environment systematically affects the opportunities and motivations for SOEs to grant trade credit. Specifically, we find that SOEs grant more trade credit in countries with less developed financial markets, weaker legal protection of creditors, less comprehensive information-sharing mechanisms, more collectivist societies, left-wing governments, and higher levels of unemployment. Firm-level factors also influence the credit-granting decisions of SOEs, with SOEs with lower levels of state ownership and higher extents of internationalization offering lower amounts of trade credit. Overall, our study offers novel insights regarding the important role of state-owned firms as providers of liquidity.Electronic supplementary materialThe online version of this article (10.1057/s41267-021-00406-5) contains supplementary material, which is available to authorized users.

Credit and Debit Card Interchange Fees in Various Countries

Credit and Debit Card Interchange Fees in Various Countries

Determinants of South American bank credit: An approach to panel data

The objective of this paper is to analyze the determinants of the domestic banking credit in the South American countries, based on panel data, for the period 2000 to 2016. The results indicate that domestic deposits and liabilities to non-residents contribute positively to the growth of private credit, with domestic funding having a more representative impact than foreign funding. Economic growth leads to a greater demand for credit and an increase in credit, while higher domestic and US interest rates reduce credit growth. Rising inflation also negatively affect private sector credit. In addition, as regards credit composition, domestic deposits and economic growth are the main components of credit expansion, and, in turn, inflation and domestic interest rates contribute negatively.

New synchronicity indices between real and financial cycles: Is there any link to structural characteristics and recessions in European Union countries?

AbstractIn this paper, we examine the comovements and relationships between real, credit, house, and equity price cycles in European Union countries looking at their link to structural characteristics and their predictive power for future recessions. We make use of new within country synchronicity indices, finding that among the different credit cycles and between the house price cycle and the real cycle, there is a relatively high level of synchronicity. Credit and gross domestic product (GDP) fluctuations seem to be less synchronised, mostly because credit volumes tend to lag the real cycle by several quarters. The high rates of private homeownership tend to be associated with larger cycles in GDP, credit, and house prices. Higher loan‐to‐value ratios, seen as a proxy of borrowing constraints, and a higher percentage of flexible‐rate mortgages, could also indicate that a country is more sensitive to shocks and possibly increase procyclicality and increase cycle volatility. Finally, the procyclicality of the credit and housing market to the GDP cycle can be linked to the fluctuation in current accounts and their misalignments with respect to the theoretical equilibrium value. Some synchronicity measures and, above all, the credit cycles may also be considered for signalling future recessions.

INCREMENTAL TAX CREDIT FOR R&D (LEGISLATIVE PROPOSALS)

In conditions of limited resources, the government is looking for the most effective way of supporting and innovative development of priority sectors of the economy. Despite the fact that the question of the correlation between direct and indirect methods of stimulating investment and innovation activity remains open, more and more economically developed countries make a choice in favor of tax incentives and preferences. The need of finding the effective mechanisms of stimulating R&D in order to develop knowledge-intensive industries, creation of favorable conditions for innovation activity in the country - all of these confirm the importance of additional restructuring of the taxation system of the innovation sector of the economy. The most common form of tax incentives for innovation activity is tax credit. Based on the analysis of a wide range of foreign studies on the effectiveness of applying a tax credit for stimulating innovation activity, the article discusses and systematizes the positive and negative aspects of applying incremental and volume tax credits for R&D. In the study were used the method of comparative analysis to confront the experience of using different types of tax credit in different countries, the methods of cause-effect and system analysis to identify the main positive and negative aspects of applying volume and incremental tax credits. Based on dialectical method of knowledge, the directions of improving the mechanism of incremental tax credit were formulated. As the result of the analysis the assessment of applying the incremental tax credit for R&D in the existing tax system of Russian Federation and the recommendations for its transformation for increasing the effectiveness are given.