Unbundling interest rate and bank credit nexus on income inequality: structural break analysis from Nigeria

Purpose – Income inequality stalls economic growth with undesirable socio-economic consequences. Despite various measures targeted towards reducing the inequality gap, disparities in income distribution persist in Nigeria. Therefore, this study aims to explore a new line of argument to the finance mechanism in reducing income inequality. Design/methodology/approach – The study uses time-series data on Nigeria from 1980 to 2015 with analysis conducted using the autoregressive distributed lag-error correction model approach of Pesaran et al. (2001). Findings – The results show amongst others that the channel of real interest rate on income inequality is through bank credit, real interest rate has an indirect relationship to income inequality and bank credit has an equalising impact on income inequality when the model is augmented for a structural break. The results show amongst others, that, on average, ceteris paribus, a 1% point increase in the real lending interest rate is associated with a 0.45% decline in the volume of bank credit. Originality/value – This paper engages a new line of argument by unbundling how financial intermediation impacts on income inequality. The extant literature submits that finance directly impacts income inequality, whereas this study investigates further to show that interest rate impacts income inequality through bank credit. That is, the transmission mechanism by which finance affects income inequality ismodelled and analysed

FINANCIAL REFORMS AND CREDIT GROWTH NEXUS ON INCOME INEQUALITY IN SELECTED SUB-SAHARAN AFRICAN COUNTRIES

Income inequality stalls economic growth with undesirable socio-economic consequences. Despite measures targeted towards reducing the inequality gap, disparities in income distribution persists. The link between financial reforms and income inequality is still relatively unexplored in the literature. This study appraises the impact of financial reforms including credit growth on income inequality using a sample of twenty selected countries in Sub-Saharan Africa (SSA) from 1980 to 2015. The broad objective is to assess the financial reforms and credit growth nexus on income inequality and establish if the reform-credit-inequality nexus exists. To achieve this, the analytical structure is designed to (1) observe the state of the financial system after the reform, (2) evaluate if credit growth is stimulated by financial reforms and (3) if credit growth has an equalising effect on income inequality. This analytical approach (general-to-specific) is conducted on the broad sample, the four sub-regions (Central, East, Southern and West Africa) and four representative countries (Cameroon, Kenya, Nigeria and South Africa). Five estimation techniques pooled ordinary least squares (OLS), fixed effects (FE), dynamic fixed effects (DFE), system generalised method of moments (sys-GMM) and error correction model (ECM)) are used in evaluating these interactive relationships. In line with the theoretical and empirical literature, the real interest rate, deposit rate, domestic credit to the private sector and the Gini index are the respective proxies for financial reforms, credit growth and income inequality. For the broad sample, findings reveal that financial reforms exhibit an indirect relationship with income inequality. For instance, from the FE results a percentage point change in the real interest rate is associated with 0.9% increase in credit growth, and a percentage change in credit growth is associated with 0.045% decrease in income inequality, on average, ceteris paribus. Similarly, results from DFE show that a percentage change in credit growth is associated with 0.062% decrease in income inequality, on the average. Results across the four regions vary. Credit growth reduces inequality significantly in Southern Africa by 0.207% while it aggravates inequality in East Africa by 0.036%. For Cameroon, Nigeria and South Africa, credit growth exhibits equalising impact on income while the reverse is the case in Kenya. Hence, contribution is made to the literature by providing evidence that the reform-credit-inequality nexus exists in addition to validating both the McKinnon-Shaw (1973) hypothesis that at a higher interest rate, financial intermediation improves. Results also validate the extensive margin theory of Greenwood and Jovanovich (1990) that as credit is extended and made available to those initially excluded income inequality reduces. Another contribution made to the scholarship methodology is empirically unbundling the effect of financial reforms on income inequality. Given these findings, one of the recommendations is that financial reforms policies that drive financial intermediation be pursued by stakeholders as these will indirectly lead to a reduction in income inequality. In other words, the ability to stimulate credit growth may be one of the avenues to reducing the income inequality gap in SSA and in developing economies in general

Evaluation of ICT development and economic growth in Africa

This paper evaluates the impact of information and communication technology (ICT) on economic growth in Africa based on a sample of 54 countries from 2005 to 2015. The sample is further divided along five sub-regions and the outcomes measured by estimating pooled ordinary least squares, random and fixed effects and system generalised method of moments models. The ICT indicators are individuals using the internet, mobile subscribers and fixed telephone subscribers with trade openness and inflation rate as control variables. Findings, among others, reveal that (1) ICT development has a statistically significant positive relationship with economic growth, (2) the output elasticities of the three ICT indicators are significantly different, (3) the “leapfrogging” hypothesis holds, (4) mobile subscription has the largest output elasticity across all specifications and has the biggest potentials to enable Africa to skip traditional developmental stages, (5) regressions for the sub-samples show statistically significant differences of the output elasticity of ICT indicators. The study recommends that concerted efforts must be directed towards harnessing the inherent benefits of ICT usage which includes reducing the rising cost attributable to the usage of communication technology facilities such as the cost of buying a cellular phone, internet connectivity rates, subscription rates and so on

Environmental preservation amidst carbon emissions, energy consumption, and urbanization in selected african countries: Implication for sustainability

On the quest for a clean and sustainable environment, the Sustainable Development Goal (SDG) 8 stipulates the need to reduce carbon emissions, decarbonize the energy system, improve energy consumption and ensure the attainment of sustainable energy. In the same vein, SDG 9 pertains to the prevention of environmental degradation, promoting biodiversity and preserving the ecosystem to support inclusive human and economic development. Given the hazardous impact of carbon emissions, if left unabated, and the benefits of preserving nature’s ecosystem, the motivation for this study hinges on analyzing factors that threaten a sustainable environment using two proxies of environmental degradation: carbon emissions and ecological footprint. With a battery of static and dynamic econometric techniques on a sample of 44 selected African countries from 1992 to 2016, findings reveal the following: (1) energy usage deteriorates the environment, and (2) urbanization has asymmetric effects on the environment. Controlling for per capita GDP, financial development and gross fixed capital formation, evidence suggests that per capita GDP has an asymmetric impact, financial development accelerates environmental degradation, while gross fixed capital formation intensifies a sustainable environment. Policy outcomes and implications for sustainability are discussed

DYNAMIC ANALYSIS OF VIOLENT CRIME AND INCOME INEQUALITY IN AFRICA

Study provides empirical evidence on the crime-inequality nexus in Africa using a panel data of 38 countries from 2007-2012. Using the pooled ordinary least squares and difference-GMM, results reveal that inequality aggravates violent crime, rule of law has a reducing effect on violent crime, death penalty is not a deterrent factor, increase in urban population contributes to rising crime, primary education has a reducing impact, unemployment aggravates violent crime, and homicide rate is higher in Southern Africa while lower in North Africa relative to West Africa. However, homicide rate does not seem to be counter-cyclical, and criminal inertia is not significant

Corporate disclosure and credit market development

The nexus between corporate disclosure and credit market development as well as whether the nexus is sensitive to the income classification of countries is not well delineated in the empirical literature. The objective of this paper is to interrogate these issues. In addressing these important issues, we rely on a panel of 122 countries and deploy a battery of econometric techniques. Generally, we find that corporate disclosure promotes credit market development. The results from the analysis of subsamples suggest that the effect of corporate disclosure on credit market development is sensitive to creditor rights protection and the income status of a country. In particular, there is evidence that the interaction between corporate disclosure and creditor rights protection significantly benefits the credit markets only in upper-middle-income countries

The EU as a global actor in sustainability policy: analyzing the EU's limited but potential influence in Iraq and Syria

The role of the EU in sustainable development has been generally seen as influential so far. The EU has proven its commitment to promoting sustainability abroad, and the EU has embarked on a transition to a low-carbon society at home. The Middle East lags behind all regions regarding sustainability due to ravaging economic, security, and social challenges, particularly in Iraq and Syria. As the economic nature of the petro-states, the petroleum price influences the GDP and economic growth not only for Iraq and Syria but the majority of resource-based economies. This creates fragile economies that are less resistant to international financial crises. Moreover, petro-states have few economic characteristics, including; high capital intensity, centralization and control of revenues, and low demand for labor. At the same time, oil has special effects on domestic conditions like authoritarianism and the temptation for civil war. This study focuses on the role of the EU in sustainability policy towards Iraq and Syria. This study highlights how the European Green Deal (EGD) influences the path to sustainability in the Middle East, specifically in Iraq and Syria. In line with this, the analytical framework discusses the logic of social actions (consequentialism and appropriateness), which are at play in EU-Middle East relations. Thus, it contributes to the role of the EU as a leading actor in global sustainability governance, focusing on a region that has been largely neglected

Political Corruption, Political Connection and Bank Performance Responsibility

Purpose: To examine the Political Corruption, Political Connection and Bank Performance nexus. Design/Methodology/Approach: The study follows a quantitative approach to its research objectives. Specifically, the study attempted to analyse political corruption, political connectedness and Bank profitability nexus for a panel of 15 commercial Banks for the time period of 5-years (2012-2016) using the GMM estimation. Findings: The study found that political corruption, GDP growth rate and cost to income, capital adequacy and non-interest income to total asset ratio are statistically significant variables. Practical Implications: These methods will have a momentous impact on the nature of relationships between political corruption, political connection and bank performance. Originality/Value: based on the findings of the current study policy makers, anticorruption institutions, banks, via others can make informed decisions and judgments. This article is an original content with appropriate references

Can Labour and Trade Stimulate the Achievement of Nigeria’s Vision 20:2020 Drive?

The paper examines the extent to which labour and trade can help Nigeria achieve the goal of attaining the position of one of the 20 largest economies in the world by 2020 using descriptive analysis of data between 2009 and 2013. The aim is to analyze the extent to which labour and trade respond to the smart initiative by the Nigerian Government in its drive towards achieving Nigeria’s vision 20:2020. The paper adopted both comparative and exploratory approaches. Exports, imports, trade as a percentage of GDP and the unemployment rate figures in Nigeria were compared with those of Belgium, Poland, Saudi Arabia and Sweden that have been in contention for the 20 th largest economy since 2009. Though, the finding of this study revealed Nigeria is still lagging behind the other four contenders of the 20 th position, but has a lot of potentials to clinch the 20 th position before or by the year 2020 since she is presently regarded as one of the fastest growing economies in the world. Therefore, the study recommends that concerted efforts should be made by the Nigerian government to mobilize and harness the potentials of the labour force to engender accelerated economic development through the establishment of an enabling environment for the expansion of economic activities, skill development and appropriate training

Drivers of credit union penetration: An international analysis

We investigate the drivers of credit union penetration with data from 90 countries for the period 2005–2017. Generally, the results show that the number of credit unions, the level of financial development of a country, the level of industrialization of a country, and the institutional environment are significantly supportive of credit union penetration. We conclude that the elimination of restrictions on the formation of credit unions (if any), the adoption of industrialization as development path, the implementation of sound monetary and fiscal policies that promote financial development, and the pursuit of good public governance are crucial for credit union penetratio