Capital Regulation, Risk-Taking, Bank Lending and Depositor Discipline

In this dissertation we investigate different aspects of capital regulations and their impact on the behavior of commercial banks. In chapter two, we foucs on the impact of capital regulations on risk-taking of commercial banks in developed and developoing countries separately and togahter. We find that such regulations indeed reduce the risk taking of commercial banks. At the same time, we examine the relationship between capital ratios and risk taking. In line with previous literature, we find that this ratio is negative also. Further examinations including the degree of liberalization and the level of finanicl development did not yield conclusive results. In chapter three, we examine the relationship between the capital regulations and total lending and total depositis. We do not find conclusive evidence in support of the ‘credit crunch\u27 or the ‘ risk retrenchment\u27 hypothesis. However, several important variables do show a tendency to change with capital ratios. As a result, changes in capital ratios in response to regulations do have important impact on bank lending and decision making. In chapter four, we study five South East Asian countries within the context of the crisis of 1996. First we test for the existence of depositor discipline in these countries and find that the sate of such discipline is very weak even after such a huge crisis. We also test the degree of risk taking in the banking industry in these countries. Evidence shows that perfect competition prevails in the bankins secotr. We also try to establist the link between the index of depositor discipline and index of competition . But we don\u27t find evidence in support of this

Is the Balassa-Samuelson Hypothesis still relevant? Cross-country evidence from 1950 -2017

Abstract. We revisit the Balassa and Samuelson hypothesis based on the relationship between real exchange rate and total factor productivity relative to the United States and investigate with panel data set of 182 countries from 1950 to 2017. Results, suggest that there is an inverse relationship between the two, an increase in productivity results in an increase in real exchange rate and the findings supports the hypothesis. We use a range of tests including Arellano-Bond Dynamic Panel Data (both fixed and random effect) estimator and findings validates the hypothesis. All these additional tests confirm that the relationship between real exchange rate and relative factor producity are related in the long-run also.Keywords. Balassa–Samuelson effect; Exchange rate, Fixed effect model, Random effect model, Trade and globalization.JEL. C15, E31, F31, F41

Relationship between Economic Growth and Debt: An Empirical Analysis for Sub-Saharan Africa

In this study, we examine the connection between economic growth and debt, with the question in mind -“Is debt a burden and bad for economic growth? Employing several sophisticated statistical approaches to investigate the problem and to assess the impact of debt on economic growth in 48 countries of Sub-Saharan Africa from 1995 to 2012, we find evidence of Granger causality between debt and economic growth in 8 out of the 48 sub-Saharan countries during the period of study and validate for the existence of “Debt Laffer Curve.” We also study the relationship between debt and economic growth rate in Granger causality and Dynamic Arellano-Bond panel data estimation frameworks, and find evidence of a negative correlation between the two variables (Debt and GDP) and confirm the findings by testing several versions of the models. Political decision and economic policy are intertwined and need to be examined carefully when implemented for economic growth and our findings lend credence to the politically unpopular austerity measures (constraints on government spending financed by borrowing). There is a limit to the economic growth rate that the government financed expenditure can bring. If the burden of debt is too high then there is a negative impact of debt on the economic growth.Keywords. Economic Growth, Debt, Laffer curve and Investments.JEL. E20, E60, E24

Capital Regulation, Risk-Taking, Bank Lending and Depositor Discipline

In this dissertation we investigate different aspects of capital regulations and their impact on the behavior of commercial banks. In chapter two, we foucs on the impact of capital regulations on risk-taking of commercial banks in developed and developoing countries separately and togahter. We find that such regulations indeed reduce the risk taking of commercial banks. At the same time, we examine the relationship between capital ratios and risk taking. In line with previous literature, we find that this ratio is negative also. Further examinations including the degree of liberalization and the level of finanicl development did not yield conclusive results. In chapter three, we examine the relationship between the capital regulations and total lending and total depositis. We do not find conclusive evidence in support of the ‘credit crunch\u27 or the ‘ risk retrenchment\u27 hypothesis. However, several important variables do show a tendency to change with capital ratios. As a result, changes in capital ratios in response to regulations do have important impact on bank lending and decision making. In chapter four, we study five South East Asian countries within the context of the crisis of 1996. First we test for the existence of depositor discipline in these countries and find that the sate of such discipline is very weak even after such a huge crisis. We also test the degree of risk taking in the banking industry in these countries. Evidence shows that perfect competition prevails in the bankins secotr. We also try to establist the link between the index of depositor discipline and index of competition . But we don\u27t find evidence in support of this

Impact of Economic Freedom on the Growth Rate: A Panel Data Analysis

This study looks at some non-conventional determinants of economic growth, with the help of the newly developed economic freedom index datasets of the Heritage Foundation/Wall Street Journal(HF/WSJ), which is a cumulative index derived from several sub-indices (trade freedom index, financial freedom, labor freedom, business and fiscal freedom index). The cumulative economic freedom index show us how open and business friendly a country is. The sub-indices show us openness across different sector of the economy, for example, the financial sector or the trade sector etc. Traditional neo-classical economic theories have explained economic growth looking at the supply of labor, capital and state of technology, with little attention being paid to institutional factors. The study presents evidence based on two panel data-sets. The first set consists of 186 countries over the period 2013, 2014 and 2015 that show institutional factors play a crucial role in economic growth. A second data-set with data for 57 countries for the period 2004–2014 also show a positive impact on the index on the growth rate of per capita GDP

Foreign Direct Investment, Trade, and Economic Growth: An Empirical Analysis of Bangladesh

The study reveals that there is a relationship between foreign direct investments, trade, and growth rate of per capita GDP for Bangladesh with the help of annual time series data for 1973 to 2014. The Vector Error Correction Model (VECM) analysis shows that there is a long-term relationship between these variables. To check the validity of the VECM model, we did a few post-estimation diagnostic tests, and found that the residuals of the regressions have a normal distribution and do not show any auto-correlation. The trade and foreign investment variables have a significant impact on the growth rate of GDP per capita. Because FDI and trade are two important components of economic growth in Bangladesh, it is important to frame policies that promote growth and reduce the barriers for capital flows