Remittances and vulnerability in developing countries: Results from a new dataset on remittances from Italy

Giulia Bettin, Andrea F Presbitero, Nikola Spatafora 10 February 2014

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Remittances from migrant workers currently represent one of the most important financial flows to developing countries. They can play an important role in pulling millions of families out of poverty. It is therefore critical to identify the key factors affecting remittances, as well as the barriers to these flows (Beck and Martinez Peria 2009 ). In particular, it is important to understand how remittances depend on macroeconomic conditions in the migrants’ host country and country of origin, and how they were affected by the global financial crisis.

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Topics:  Development Migration

Tags:  Italy, migration, global financial crisis, financial development, Remittances

Finance and growth: Too much of a good thing?

Thorsten Beck 27 October 2013

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Over the past 20 years, economists have accumulated a substantial body of empirical evidence that financial sector deepening is a critical part of the economic development process. This shows a well-functioning financial system is a conditio sine qua non for modern market economies to flourish. What started with simple cross-country regressions, as used by King and Levine (1993), has developed into a large literature using an array of different techniques to look beyond correlation and controlling for biases arising from endogeneity and omitted variables.

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Topics:  International finance

Tags:  economic growth, financial development

Migrating out of poverty: The role of finance

Meghana Ayyagari, Thorsten Beck, Mohammad Hoseini 23 June 2013

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For better or worse, the 2008 financial crisis has put the financial sector again at the centre of public debate. Several commentators have suggested that financial liberalisation contributed both to the financial crisis and to growing income inequality (e.g. Krugman 2009 and Moss 2009).  On a more general level and as in the case of other policy areas associated with the Washington consensus, financial liberalisation has been controversial among academics and policymakers, as it is not clear whom the benefits of expanded credit allocation accrue to.

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Topics:  International finance

Tags:  India, financial development

Interest groups and government capabilities matter for financial development

Eduardo Cavallo, Carlos Scartascini 12 May 2012

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The debate on the benefits and limits of financial development has come to the fore with the global financial crisis. The fact that the epicentre of the global financial crisis was in countries with developed credit markets has led some commentators to argue that financial development may have gone too far. However, much less attention has been paid to the fact that financial markets remain underdeveloped in many developing and emerging markets.

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Topics:  Development International finance Politics and economics

Tags:  institutions, developing countries, emerging markets, financial development

Finance, long-run growth, and economic opportunity

Ross Levine 25 October 2011

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Finance is powerful. The financial system can be an engine of economic prosperity – or a destructive cause of economic decline and misery. The impact of the financial system on the rest of the economy depends on how it mobilises savings, allocates those savings, monitors the use of those funds by firms and individuals, pools and diversifies risk, including liquidity risk, and eases the exchange of goods and services.

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Topics:  Financial markets International finance

Tags:  economic growth, financial development, financial innovation

Sovereign defaults, banks and financial institutions

Nicola Gennaioli, Alberto Martin, Stefano Rossi 17 November 2010

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Recent sovereign defaults highlight a close link between government default and financial sector turmoil, where banks often take centre stage. In the Russian default of 1998 the government's suspension of debt payments triggered large losses on the balance sheets of Russian banks, which had heavily invested in public bonds. These events, further exacerbated by the devaluation of the rouble, allegedly contributed to cause a financial sector meltdown and a credit crunch. Although particularly severe, the Russian episode is by no means exceptional.

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Topics:  Global crisis International finance

Tags:  financial development, default, Debt crisis, Fiscal crisis

Can financial sector reform help bring informal firms into the formal sector?

Thorsten Beck, Chen Lin, Yue Ma 13 October 2010

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While the global crisis has amply demonstrated the economic fragilities that a highly evolved financial sector can create, it is important not to “throw the baby out with the bath water”. The financial sector is critical to the economy. The important connection between financial development and growth is supported by a growing literature (Levine 2005).

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Topics:  Development Taxation

Tags:  taxation, tax evasion, financial development, informal sector

“Mother, can I trust the government?” Stable democracies are more likely to enjoy sustained financial development

Marc Quintyn , Geneviève Verdier 23 September 2010

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The epicentre of the global crisis can be traced to the world’s most developed financial systems, but few would consider this enough to challenge the broad consensus that financial development is good for economic growth. Yet despite this consensus, levels of financial development vary widely across countries (Figure 1), and many governments have failed to jumpstart their country’s financial markets.

Figure 1. Cross-country disparities in the ratio of credit to private sector GDP (2005) (each bar represents a country)

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Topics:  Development Financial markets Politics and economics

Tags:  democracy, institutions, financial development

The policy roots of finance

Giuseppe Bertola, Anna Lo Prete 20 May 2010

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Finance boomed for quite some time. And then it crashed. To understand what might happen as the world begins to emerge from the crisis, we need to try and understand where finance came from. At the global level, finance grew along with international economic integration at the turn of this century, as well as at the beginning of the 20th century.

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Topics:  Global economy International finance

Tags:  financial development, openness, financial deregulation

The crisis and the developing countries

Fabrizio Coricelli 01 May 2010

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Economists and policymakers are still debating the causes of the global crisis and the prospects for recovery in the world economy (see the excellent column by Berkmen et al. 2010 on this site). But one point of agreement is that emerging economies have so far have weathered the crisis much better than advanced countries.

Figure 1. GDP growth, 2006-2009 (quarter over same quarter of previous year)

Source: IMF, WEO Update, 2010

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Topics:  Development Global crisis International trade Migration

Tags:  Africa, developing countries, migration, financial development, global crisis

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