Increased Credit Availability Research Articles

Monetary policy transmission tools and private sector performance – the Nigerian experience

Credit to private sector is considered vital for the stimulation of domestic investment, job creation, economic growth, and general improvement in the standard of living of the people. This is because the economic activity in the private sector significantly complements governments’ efforts in attaining macroeconomic objectives, globally. However, as laudable as the benefits of credit to private sector has been in catalyzing private sector performance in developed economies, the situation in most transitioning economies, particularly, Nigeria has been far from satisfying. Several studies in academic literature have identified political instability, poor institutional framework, absence of fiscal transparency, macroeconomic factors and frequent policy changes as having significant constraining influences on credit availability in Nigeria with plausible recommendations to private sector performance. However, the absence of noticeable improvement over the years, and its accompanying growth-retarding multiplier effects on domestic investment and productivity in Nigeria has instigated more concentrated studies on the direct impact of monetary policy framework in the determination of the performance of private sector through credit availability. Therefore, this study empirically evaluates the impact of key monetary policy toolkits on the availability of private sector credits and performance in Nigeria. To this end, annual time series secondary data from 1993 to 2023 were sourced from National Bureau of Statistics and Central Bank of Nigeria Statistical Bulletins for various years within the study period. The study adopts Autoregressive Distributed Lag (ARDL) estimation technique after carrying out pre-diagnostic tests such as ADF unit root test and Bound Cointegration test. Our result reveals that money aggregates (MAG) is positive and significant in explaining variations in private sector credit and performance. Further results reveal that monetary policy rate (MPR), open market operations (OMO) and inflation rate (INR) impacted negatively on the performance of private sector in Nigeria within the study period. Therefore, the study concludes that the performance of the private sector in Nigeria will improve with increased credit availability, which is positively influenced by systematic increase in money aggregates and efficiently expanded monetary policy framework. The study recommends adoption of a harmonious blend of a more relaxed monetary policy framework with purposeful compliant-based regulation that will free up liquidity for increased private sector credits and performance. Keywords: Credit to Private Sector, Monetary Policy Rate, Open Market Operations and Money Aggregates.

Does credit asset securitization promote firm innovation?

ABSTRACTThis study investigates how bank credit asset securitization affects firm innovation using the difference-in-differences (DID) method. Using data from non-financial firms listed in China, we find that bank credit asset securitization significantly promotes firm innovation. The mechanism is that credit asset securitization can reduce the cost of credit financing, increase credit availability, and alleviate financing constraints for firms. Our research is the initial one to investigate the causal impact of credit asset securitization on corporate innovation utilizing data from China. This contribution augments the burgeoning literature on the relationship between the financial system and the real economy in emerging markets.

Credit Risk Management and Market Performance of Quoted Deposit Money Banks in Nigeria

This study investigated the effect of credit risk management on market performance of deposit money banks in Nigeria. Market performance was used as dependent variable proxy as net assets per share while management quality ratio, capital adequacy ratio, sensitivity to market ratio, credit to deposit ratio and asset quality ratio were used as independent variables. A sample of 12 deposit money banks were used for the period of ten years spanning 2012 to 2021. The study employed ex-post facto and longitudinal research design. The secondary sources of data were collected from annual reports of the selected deposit money banks and five (5) specific objectives and hypotheses were subjected to some preliminary data tests like descriptive statistics, Pearson correlation analysis and Variance Inflation factor (VIF) were analyzed using panel regression analysis. Using a sample of 120 banks-year observations, the result revealed that management quality ratio, credit to deposit ratio and asset quality ratio have negative and statistically significant effect on market performance proxy as net assets per share of deposit money banks in Nigeria which was statistically significant at 5% level of significance. Conversely, Capital adequacy ratio and sensitivity to market ratio was found to have positive but non-significant effect on market performance of deposit money banks in Nigeria. Based on the findings above, the study recommends among others, that managers of Banks in Nigeria should enhance their management quality and capacity in credit analysis to reduce the risk of default in repayment as this will stem the cyclical nature of net assets per share and increase their market performance. Moreover, adequate provision against loan loss should be made and Nigeria banks should adopt an aggressive deposit mobilization to increase credit availability and develop a reliable credit risk management strategy with adequate punishment for loan payment defaults. The st

Overcoming the Global Economic Crisis in The Perspective of Islamic Finance

This paper makes a connection between the global financial crisis and an Islamic financial model. The goal is to downplay the severity and frequency of the financial crisis by sharing risk among financial participants. This is accomplished through a system of shared credit creation. When purchasing real goods and services from people who have them and need to sell, people are given access to credit that they can use to buy what they need. Both sellers and buyers want to receive delivery of their purchased items, so the system creates economic growth through increased credit availability. Studying Islamic finance literature allows people to explore the possibilities and restrictions of inherited situations. This leads to new financial design solutions for the current financial crisis as well as future financial collapses. It also uses critical thinking and analysis to create new possibilities and constraints in situations. New financial systems should use a business model based on shared profits and losses. This was based on academic studies and doesn’t include any real-world testing. By incorporating Islamic financial principles into business practices, a new financial model could help finance businesses. This alternate system for the banking system could help control our financial system and encourage economic growth through more controlled credit expansion TRANSLATE with x EnglishArabicHebrewPolishBulgarianHindiPortugueseCatalanHmong DawRomanianChinese SimplifiedHungarianRussianChinese TraditionalIndonesianSlovakCzechItalianSlovenianDanishJapaneseSpanishDutchKlingonSwedishEnglishKoreanThaiEstonianLatvianTurkishFinnishLithuanianUkrainianFrenchMalayUrduGermanMalteseVietnameseGreekNorwegianWelshHaitian CreolePersian // TRANSLATE with COPY THE URL BELOW Back EMBED THE SNIPPET BELOW IN YOUR SITE Enable collaborative features and customize widget: Bing Webmaster PortalBack// This page is in English Translate to Indonesian AfrikaansAlbanianAmharicArabicArmenianAzerbaijaniBengaliBulgarianCatalanCroatianCzechDanishDutchEnglishEstonianFinnishFrenchGermanGreekGujaratiHaitian CreoleHebrewHindiHungarianIcelandicIndonesianItalianJapaneseKannadaKazakhKhmerKoreanKurdish (Kurmanji)LaoLatvianLithuanianMalagasyMalayMalayalamMalteseMaoriMarathiMyanmar (Burmese)NepaliNorwegianPashtoPersianPolishPortuguesePunjabiRomanianRussianSamoanSimplified ChineseSlovakSlovenianSpanishSwedishTamilTeluguThaiTraditional ChineseTurkishUkrainianUrduVietnameseWelsh Always translate English to IndonesianPRO Never translate English Never translate ejournal.iainpalopo.ac.id

The impact of financial development on the manufacturing industry in resource-rich countries: Empirical evidence from Azerbaijan

The study is devoted to assessing the causal relationship between financial development and economic growth in the manufacturing sector of Azerbaijan, a country rich in oil and gas resources. The study covers quarterly data from 2005-2021. The Johansen co-integration test and the Toda-Yamamota test are used to analyze temporal and causal characteristics between indicators. The results showed that there is no co-integration between financial development and growth in the long run. Along with this, no evidence was found indicating the presence of a causal relationship between variables in the short run. The results show that increased credit availability does not necessarily positively impact productivity and capital growth in the manufacturing sector. At the same time, the growth of loans contributes more to the growth of imports than to the growth of domestic production. The hypothesis about the negative impact of the "resource curse" on financial development is confirmed by financial market development in Azerbaijan, which makes it difficult to assess the securities market's impact on manufacturing sector growth. Research on the institutional aspects of financial regulation and finding ways to increase the relative attractiveness of the manufacturing sectors could provide more detailed recommendations to improve the effectiveness of financial instruments.

Impact of Monetary Policy on Credit and Investment in Nigeria (1981 – 2020)

In auspicious macroeconomic setting, monetary policy should increase credit availability, particularly in the real sector, to spur investment; however, this is not the case in the Nigerian economy. In this study, the impact of monetary policy on bank credit and investment in Nigeria from 1981 to 2020 was investigated. The central bank of Nigeria’s statistics bulletin was the source of the data used in this study. Using the data gathered, the study used Auto-Regressive Distributed Lag (ARDL). The study’s findings indicate that bank loans and investment have a long-term association with monetary policy. In addition, it was observed that while bank loans to the private sector and the liquidity ratio had short-term negative effects on investment, the cash reserve ratio, monetary policy, money supply, and inflation rate had long-term positive effects on investment. According to the study’s findings, monetary policy significantly and favorably affects bank credit and investment in Nigeria. The study suggested that the CBN adjust the monetary policy rate by reducing the cash reserve ratio, which will increase liquidity and allow the banks to discharge their credit capacity with the aim of improving investment in Nigeria. Monetary authorities should view credit as a major channel for implementing monetary policies, and this urgent adjustment should be made.

Can the county to district reform in China restrain corporate earnings management? From the perspective of regional local protection

ABSTRACT Under the strategic background of regional coordinated development, the County to District can remove administrative barriers and reduce local protection. Based on the matching data of Chinese A-share listed companies from 2000 to 2018 and the County to District Reforms, this paper empirically explores the influence of County to District Reforms on earnings management. We find the County to District Reform can effectively reduce earnings management, especially in areas with high local protection. Further mechanism analysis shows the County to District Reforms reduce local protection by increasing credit availability for enterprises, and ultimately restrain earnings management. Additional analysis shows the County to District Reforms increase the bank loans of enterprises in areas with higher local protection. This paper deepens the understanding of the County to District Reforms and enriches the literature on how government actions can affect corporate governance.

A Bubble Doomed to be Pricked Deconstructing the Chinese Real Estate Bubble

China’s real estate housing boom has been a dreadful concern for economists worldwide. This paper analyzes the formation of the Chinese real estate housing bubble and investigates the factors that led to the bubble. Stimulated by the central government’s fiscal pressure, a redistribution of the tax revenues led to China’s local government’s “land financing” strategy, flaming the rise of housing prices. Moreover, due to the global financial crisis of 2008, the Bank of China proposed low-interest rates while the central bank increased credit availability to rejuvenate China’s economic state, which led to long-run damage. Furthermore, the expected traditional filial duty of Chinese parents to prioritize their children’s education as an investment and the obligation of owning a home for males before marriage also triggered the skyrocketing double-digit inflation rates. Finally, economists worry that the increased construction demand due to the rising urban population in the early 1970s will doom the new modern world as the population is now declining, followed by the low demand for housing in the future.

Exploring the Relationship among Export Resources, Exporting Capability & Exporter-Foreign Distributers relationship on Export Performance: In the Case of Exporting Companies in Ethiop

Export Performance and Economic Growth Relations are becoming the main agenda in the international and regional development programs around the world. The purpose of this study was to exploring the Relationship between Export Resources, Exporting Capability, Exporter-Foreign Distributers Relationship and their effect on Export Performance. Despite the fact that 300 questionnaires were issued to a random sample of Ethiopian exporters, 291 questionnaires were returned at the end of the data collection process, yielding a 97 percent response rate. Proportional stratified sampling approaches were used to sample small, medium, and large export businesses. The relationship between the exporter and the distributor, as well as the management of export resources, has a positive and significant impact on export performance. On the other side, export capabilities failed to mediate the relationship between export resources and export performance. The connection between Export Resources and Export Performance was mediated by Managing the Exporter-Distributor Relationship. Ethiopian exporters should focus on building strong ties with international distributors headquartered either at home or in the host countries to boost their export performance. Future research could look into the differences in the export business between larger, medium, and small exporters, all of whom have different resources, qualified personnel, bargaining strength, and so on. Finally, Resource capability’s failure to mediate Export resources and export performance warrants further investigation. For undeveloped countries like Ethiopia, export is a critical component of economic growth and long-term development. As a result, policymakers should work to improve the country’s export performance by increasing credit availability, simplifying export sector laws, and formulating short-term, medium-term, and long-term export growth plans. To enhance trade, the government should aid exporters in creating, nurturing, and growing stronger cooperation among national, regional, and worldwide distributors.

Effect of financial deepening on economic growth: Does it encourage income group transition?

The rapid growth of financial deepening raises the problem of its effect, beneficial for economic development. This paper aims to demonstrate the relationship between economic growth (GDP per capita growth, GNI per capita) and financial depth (domestic credit to private sector and credit availability) in 142 countries, split into four income groups, over 2000–2020, using correlation analysis and data from the World Bank and the IMF. Besides, a comparative analysis of domestic credit to the private sector, economic freedom, Gini index, total government expenditure and national savings of countries that increased their income group status over 2011–2020 is presented. Financial deepening (increased credit availability and expansion of domestic credit to the private sector) encourages economic growth (via GNI per capita and GDP per capita growth). Although the presence of a nonlinear relationship between economic growth (GDP per capita growth) and financial depth (domestic credit to private sector and credit availability) over 1991–2020 is insufficient, there is a linear relationship between GNI per capita and credit availability, between credit availability and domestic credit to the private sector for the same sample of countries over 2000–2020. Meanwhile, there is a tendency towards a decrease in the correlation between GNI per capita and GDP per capita growth. Given the revealed linear correlation between domestic credit to the private sector and GNI per capita, financial deepening positively impacts income growth, and this dependence strengthens with increasing income levels. Target values of domestic credit to the private sector are proposed for the income group transition. AcknowledgmentThe paper was funded as a part of the “Relationship between financial depth and economic growth in Ukraine” research project (No. 0121U110766), conducted at the State Institution “Institute for Economics and Forecasting of the NAS of Ukraine”.

Examining the Relationship between Land Values and Credit Availability

AbstractIncreased credit availability facilitates land acquisition, but higher land values also hinder it. We investigate the impact of credit availability on land values, after regulatory changes in the lending system. We build an index of increased credit availability using Federal Reserve and Federal Deposit Insurance Corporation data. County-level panel fixed effects estimations are performed controlling for land value determinants, credit availability, and county-level macroeconomic factors. We find that estimating the effects of credit availability separately masks its total effect. Results show a 0.1 change in the index for increased credit availability is associated with 1.64–1.96% increase in land values.

The Impact of Balance Sheet Lending versus Securitization Booms on the Severity of the Great Recession

I separately estimate the effect of local credit booms driven by balance sheet lending and those driven by securitization during the 2002-2006 period on the severity of the 2007-2009 recession in the United States. I construct a novel dataset, linking publicly available data on residential mortgage originations from the Home Mortgage Disclosure Act together with bank financial statements and county level economic outcomes. I exploit geographic variation in bank origination activity across counties to construct county level measures of exposure to securitization and balance sheet lending activity during the 2002-2006 period that are orthogonal to local economic conditions. Results show that 2002-2006 securitization exposure is predictive of sharper declines in home prices, employment, and a rise in mortgage delinquencies during the subsequent crisis period. The same is not true for balance sheet lending, which does not affect crisis period home prices and generates a drop in employment that is con fined to the nontradable sector. Results suggest that this difference is driven by risk taking that is specific to securitized lending. Balance sheet booms generate an expansion in lending to higher quality borrowers, while securitization booms increase credit availability at the lower end of the credit distribution.

Examining the Relationships between Land Values and Credit Availability

Given the changes made to the agricultural lending system since the 1980s farm crisis, we investigate the current effects of credit availability on land values. Using data from Federal Reserve Agricultural Credit Surveys, we measure credit availability and perform county-level panel fixed effects estimations controlling for land value determinants, credit availability factors, and county and macroeconomic factors. We build an indicator of increased credit availability and find that estimating farmland values with different factors of credit availability separately could mask combined effects. When conditions for credit availability increase or remain unchanged from the previous year, land values may increase by up to 25%. While higher credit availability may facilitate land acquisition, it can also put upward pressure on land values.

Examining the Relationships between Land Values and Credit Availability

Given the changes made to the agricultural lending system since the 1980s farm crisis, we investigate the current effects of credit availability on land values. Using data from Federal Reserve Agricultural Credit Surveys, we measure credit availability and perform county-level panel fixed effects estimations controlling for land value determinants, credit availability factors, and county and macroeconomic factors. We build an indicator of increased credit availability and find that estimating farmland values with different factors of credit availability separately could mask combined effects. When conditions for credit availability increase or remain unchanged from the previous year, land values may increase by up to 25 percent. While higher credit availability may facilitate land acquisition, it can also put upward pressure on land values.

Political uncertainty and the geographic allocation of credit: Evidence from small businesses

We investigate how political uncertainty affects the geographic distribution of bank lending to small businesses. Using exogenous variation in gubernatorial elections with binding term limits, we show that political uncertainty causes local banks to increase out-of-state lending to small firms, especially to firms located in the wealthiest out-of-state counties. The increase in credit availability in turn leads to an increase in employment growth and net firm creation in sectors that need larger amounts of startup capital. Our results indicate that geographic diversification and financial integration enable banks to sidestep the negative local economic effects of political uncertainty.

Self-employment earnings premiums/penalties and regulations: evidence from developing economies

This paper investigates the relationship between countries’ regulatory environment, as measured through business, credit, labor and trade regulations, and the wage premium or penalty associated with self-employment over the period of 1970 to 2011. When considering all self-employed workers, there is no evidence that labor market regulations are associated with overall earnings penalties or premiums. However, stricter business regulations and bureaucratic red tape that restrict starting, operating, or closing a business are associated with increased earnings penalties for non-professional own-account self-employed workers, as well as premiums for employers and own-account professionals. Both more regulated trade and increased credit availability are correlated with increased earnings penalties for all self-employed workers. The association is consistently larger and more robust for female self-employed workers compared to men. These findings are consistent with regulatory restrictions on business entry and access discouraging more productive workers, particularly women, from entering non-professional own-account self-employment.

Financial liberalization and access to credit in emerging and developing economies: A firm-level empirical investigation

Several emerging market and developing economies (EMDEs) embracing financial liberalization have seen a growing presence of foreign banks in their countries over the last two decades. While foreign banks can contribute to reduced costs of financial intermediation which could result in increased credit availability, there is greater ambiguity about the relationship between foreign bank presence and firms’ access to credit. In this paper, we combine both disaggregate firm-level data from the World Bank Enterprise Survey (WBES) as well as country-data to construct a novel and comprehensive measure capturing firms’ credit constraints as well as information verifiability for firms. Using a firm-level sample of 37,578 observations representing 60 EMDEs covering the time period 2006 to 2014, we employ an ordered probit model on cross-sectional data to understand empirically how foreign banks affect firms’ access to credit. Our results show evidence for foreign bank presence tending to ease firms’ credit constraints. We also find that firms with audited financial statements tend to experience a reduction in credit constraints. Finally, our results point out that for micro, small and medium firms, in relation to the large firms, greater information availability through audited financial statements jointly associated with greater foreign bank presence tends to ease firm credit constraints.

Strapped for cash? Funding for UK high growth SMEs since the global financial crisis

While high growth firms (HGFs) are crucial drivers of economic growth, to date there has been a dearth of research examining their funding requirements. Drawing on a survey of over 8000 UK Small and Medium Sized Enterprises (SMEs), this paper investigates the capital structure and access to credit in high growth SMEs in the period following the global financial crisis. The findings challenge conventional wisdom about high growth SMEs in certain respects. They find it no harder than non-high growth SMEs to access external finance. The vast majority of high growth SMEs rely strongly on debt-based finance for their funding, not equity finance. High growth SMEs are much less likely to seek finance for working capital purposes but are no more likely to seek finance to invest in R&D than less rapidly growing SMEs. The findings suggest little justification for government intervention aimed at increasing credit availability for HGFs as currently espoused by the UK government.

A Model of Endogenous Loan Quality and the Collapse of the Shadow Banking System

I develop a macroeconomic model in which banks can affect loan quality by exerting costly screening effort. Informational frictions limit the amount of external funds that banks can raise. In this framework, I consider two types of financial intermediation: traditional banking and shadow banking. By pooling different loans, shadow banks achieve a higher endogenous leverage compared to traditional banks, increasing credit availability. However, shadow banks also make the financial sector more fragile because of the lower quality of the loans they finance and because of their exposure to bank runs. In this setting, unconventional monetary policy can reduce macroeconomic instability. (JEL E32, E44, E52, G01, G21, G23, L25)

The Role of Bankers in the U.S. Syndicated Loan Market

I construct a novel dataset of individual bankers in the U.S. syndicated loan market to analyze the impact of bankers for the largest, most transparent borrowers. I exploit within-firm variation in personal relationship strength from banker turnover and find that stronger relationships lead to significantly lower interest rates. Relationship loans are associated with fewer bankruptcies and fewer favorable modifications in renegotiations. Lower rates therefore derive from increased lending efficiency, rather than nepotism. While personal relationships generally increase credit availability, during the financial crisis these relationships locked in borrowers with affected banks. Bankers also exhibit time-invariant preferences for specific loan characteristics.