Department of Banking and Finance

Permanent URI for this collectionhttp://197.255.125.131:4000/handle/123456789/23056

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Author: search.filters.author.Abor, J.Y.Subject: search.filters.subject.Developing countries

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    Central bank independence, elections and fiscal policy in Africa: Examining the moderating role of political institutions
    (International Journal of Emerging Markets, 2019-12-02) Agoba, A.M.; Abor, J.Y.; Osei, K.; Sa-Aadu, J.; Amoah, B.; Dzeha, G.C.O.
    Purpose – The purpose of this paper is to primarily investigate the ability of independent central banks (central bank independence (CBI)) to improve fiscal performances in Africa, accounting for election years, and also to examine whether the effectiveness of CBI in improving fiscal performance is enhanced by higher political institutional quality. Design/methodology/approach – Using recent CBI data from Garriga (2016) on 48 African countries, 90 other developing countries and 40 developed countries over the period 1970–2012, the authors apply a two stage system GMM with Windmeijer (2005) small sample robust correction estimator to examine the impact of CBI and elections on fiscal policy in Africa, other developing countries and developed countries. Findings – The authors provide evidence that unlike in other developing countries and developed countries, CBI does not significantly improve fiscal performance in Africa. However, the effectiveness of CBI in improving fiscal performance in Africa is enhanced by higher levels of institutional quality. Although elections directly worsen fiscal performance in Africa, institutional quality enhances CBI’s effect on improving fiscal performance in election years across Africa, other developing countries and developed countries. Practical implications – The findings of the study are significant as they provide insight into the benefits of having strong institutions to complement independent central banks in order to control fiscal indiscipline in election years. Originality/value – The study is the first among the studies of CBI-fiscal policy nexus, to measure fiscal policy using net central bank claims on government as a percentage of GDP. In addition to the use of fiscal balance, this study also uses cyclically adjusted fiscal balance as a measure of fiscal policy. This is a critical channel through which independent central banks can constrain govern
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    Remittances, Banks and Stock Markets: Panel Evidence from Developing Countries
    (ELSEVIER, 2017) Issahaku, H.; Abor, J.Y.; Harvey, S.
    The study investigates dynamic and causal linkages among international remittance inflows, banking sector development and stock market development in a large panel of developing countries. We use two stage least squares and impulse response functions to shed light on the remittance-bank-stock market nexus. We find that remittances promote banking sector development in low remittance receiving countries, but not in high remittance receiving economies. We establish a bi-causal negative link between stock markets and remittances in countries with developed banking systems. In low remittance recipient countries, remittances decrease stock market development; however, in remittance dependent countries, remittances promote stock market development. Again, stock market development promotes remittance inflows in remittance dependent countries, while obstructing it in low remittance recipient countries. We suspect lingering doubts about the quality of developing country stock markets to be behind this latter result, though the fact that most developing countries’ financial systems are bank based could also play a role.
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    Remittances, Banks and Stock Markets: Panel Evidence from Developing Countries
    (ELSEVIER, 2017) Issahaku, H.; Abor, J.Y.; Harvey, S.
    The study investigates dynamic and causal linkages among international remittance inflows, banking sector development and stock market development in a large panel of developing countries. We use two stage least squares and impulse response functions to shed light on the remittance-bank-stock market nexus. We find that remittances promote banking sector development in low remittance receiving countries, but not in high remittance receiving economies. We establish a bi-causal negative link between stock markets and remittances in countries with developed banking systems. In low remittance recipient countries, remittances decrease stock market development; however, in remittance dependent countries, remittances promote stock market development. Again, stock market development promotes remittance inflows in remittance dependent countries, while obstructing it in low remittance recipient countries. We suspect lingering doubts about the quality of developing country stock markets to be behind this latter result, though the fact that most developing countries’ financial systems are bank based could also play a role.
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    Does development finance pose an additional risk to monetary policy?
    (Elsevier ScienceDirect, 2016-08) Issahaku, H.; Harvey, K.S.; Abor, J.Y.
    This study investigates whether remittances entail extra risk for macroeconomic policy management and examines the role (if any) that thefinancial system can play in the interaction between remittances and monetary policy. Employing panel data for 106 developing countries from1970 to 2013, the results from our panel vector autoregressive (PVAR) model reveal that remittance volatility reduces macroeconomic risk indeveloping countries while simultaneously stimulating a reduction in domestic interest rates. This finding remains robust to alternative specificationsof remittance volatility and monetary policy risk and to variations in the degree of financial development. The key lesson from this study is thatdeveloping countries can leverage the positive impact of remittances in reducing macroeconomic instability by implementing policies that induceremittances.