This thesis investigates the nature and extent of financial inclusion in Sub-Saharan Africa (SSA). It sequentially investigates this in three related studies. The first study examines the impact of access to finance on poverty, while the second investigates the extent to which cross-country structural and macroeconomic variations contribute to the observed variations in the levels of financial inclusion. Finally, because both financial inclusion and financial stability have been embraced as key policy initiatives over the past decade, the third study examines the nature of relationship between these two policy goals. The first paper uses household-level data from FinScope Surveys conducted in eight SSA countries between 2014 and 2015 to examine the impact of access to finance on household wealth. The few studies which have looked at this relationship in the past apply a linear estimation and thus inadvertently assume a uniform distribution across all levels of poverty. This study examines the heterogeneous impact of access to finance along the entire wealth distribution line using a Re-centered Influence Function (RIF) regression model. Further, to eliminate potential endogeneity, an instrumental variable quantile approach is implemented. Results from both estimations indicate that the unconditional effect of access to finance on poverty is non-monotonic. For most of the countries, the effect is highest at the median level, and very low at the bottom of the wealth index. This suggests that the extension of formal financial services disproportionately benefits the middle-class more than the very-poor and rich categories. The second paper uses macroeconomic data obtained from various World Bank databases over the period 2004-2014 to examine the extent to which the observed cross-country variations in financial inclusion are mirrored by country-specific structural and macroeconomic characteristics. To conceptualize, the study uses a benchmark model to establish the optimal level of financial inclusion given the country's fundamentals, and thus provide a meaningful cross-country comparison. The key structural and policy factors that determine the extent of the gap between the actual and predicted levels of access to finance are analysed via a fixed-effects model based on selected SSA countries. The results suggest the existence of a gap in access to finance within the region, compared to their potential. The gap is wider in banking systems with high concentration, low proportion of foreign banks and poor economic conditions. The final paper empirically examines the theoretical ambiguity between financial inclusion and stability. Theory provides conflicting views on whether the two are complimentary, or mutually exclusive. This paper examines this dynamic relationship via a system-GMM panel estimation model using a panel of 40 countries from the SSA region over the period 2004-2014, while controlling for both bank-specific and macroeconomic-wide factors. The results indicate that financial inclusion has a positive impact on bank stability, however, high market power within the banking systems and poor institutional framework tends to undermine the impact of financial inclusion on stability. Overall, the results provide evidence that the existing portfolio of formal financial services does not provide sustainable solutions to poverty eradication in terms of meeting the unique needs of the poorer members of the societies. This ultimately widens the gap between the poorest and the middle-class which further complicates the poverty structure. Therefore, there is a need for more investment on improving both the range of existing product offering and the financial capabilities of the poor, in order to improve their participation in financial markets. Demand-side policies should focus on increasing the bankable population by improving both awareness and usage of financial services and products. Supply-side policies should seek to eliminate market frictions by reducing concentration levels, improve competiveness through relaxation of entry restrictions, and opening the market to foreign institutes and non-banking players, and thus improve innovation in both new products offering and service delivery. This work further argues that financial inclusion is not only a developmental or welfare issue, but has positive ramifications on the banking system. Therefore, to be effective financial inclusion policies should adopt a market systems approach to development, which recognizes the importance of support structures and seek to benefit the poor by incentivizing service providers to improve product quality, variety and returns, and thus create value throughout the value chain. An effective approach should also embrace the role of macro-prudential regulatory and supervisory framework, as an indispensable tool, not only in governing the behavior of financial services providers, but because of its efficacy in building consumer confidence- a key element for increased access and usage of financial services.

Over time neighbourhoods have shown opposition to Government subsidized housing programmes being developed within their neighbourhoods. This is due to the perceived negative impacts that these housing developments have on the neighbourhood. Opposition has grown since implementation of the Housing Code of 2009. The Code aims to integrate low income households into more affluent areas, in order to provide these households with greater access to economic and social opportunities, which they were previously denied having been placed on the urban periphery. Opponents to subsidized housing developments have nevertheless expressed concerns with a possible decline in property values. These concerns are however based on perception, rather than factual evidence to this effect. There is a paucity of studies on the topic within the South African context. While there are a number of studies on the topic within other countries, the results cannot be generalized due to the difference in demographics, housing subsidy programmes and structure of the City of Cape Town. An analysis of the impact within the City of Cape Town context may thus be beneficial. This paper analysed the impacts of Residential Development Programme (RDP) housing and Social Housing (rental) projects, as these are the subsidized housing developments that have received the most opposition. The paper has thus used a Difference-in-Difference Hedonic Pricing Model analysis to determine the neighbourhood impacts of subsidized housing on the property values of surrounding neighbourhoods. RDP housing was estimated to have a negative effect on proximate property values, while Social Housing was estimated to have no effect. It is recommended that future developments are aesthetically appealing, have landscaping, are well maintained and are well integrated with the surrounding community. These efforts should also be well communicated to the host communities during the public participation events. Further analysis is required to determine the cause of the negative effects of the RDP development to ensure that these are mitigated in future RDP projects. These may allow the State to provide the much-needed housing opportunities, with limited opposition from the host communities.

Many economists have observed that the financial system has a positive and monotonic effect on economic growth. In this study we reaffirm the finance-growth nexus. We adopt a three-tier approach for the study’s methodology using panel data of 66 countries from 1986 to 2005. Firstly, we test for the finance-growth nexus with particular emphasis on financial sector indicators that best represent the effective financing activity in the economy. Secondly, we examine the financial market type that exacerbates or mitigates the effects of a shock (financial crisis). Thirdly, we investigate the causes of financial crisis by looking at both the macroeconomic and institutional, and micro-level determinants of banking crisis. Our results show that financial development enhances economic growth, more so, in the middle income countries. We also find that increased domestic private credit and activity reduces the effects of a financial shock on growth. In addition, openness of the economy in low income Sub-Saharan African countries is important for growth even where financial development indicators appear not to influence growth. In most economies the investment channel and openness are consistent in explaining economic growth.

This study empirically investigates the hypothesis of causality between financial development and economic growth in seven Middle East and North African countries from a time series perspective. I use ordinary least squares and vector auto regression estimations to infer Granger Causality, after controlling for a set of nonfinancial variables. Results show evidence of unidirectional and bidirectional causality between financial development and economic growth in four cases, no causality in two cases, and no significant relation between financial development and economic growth in one case. The significance of the relations varies on case-specific basis. I also control for three indices of civil liberties, economic and political freedom, and find significant evidence of an impact on GDP in three out of seven countries.

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This thesis examines the relationship between the development of the financial system and economic growth in the United Kingdom, using a time series econometric methodology. It extends the existing literature in three ways. First, it applies a disaggregated approach, testing the relationship not only at the aggregate level, but also for the manufacturing and service sectors of the UK. This allows the modeling to be driven by the financial characteristics of each sector, thereby providing a firmer foundation for policy recommendations. Second, `fmance-augmented' production functions are estimated throughout, thus yielding coefficients that are theoretically consistent and interpretable. The empirical results suggest that the aggregate economy faces decreasing returns to scale, the manufacturing sector exhibits increasing returns to scale while the service sector appears to display either constant or decreasing returns. Third, both these innovations mean that the study is also able to make a contribution to the on-going sectoral productivity and policy debates in the UK, emphasising the role of finance in this process. The study finds evidence that the evolution of the finance-output relationship in the UK is sector-specific, in that the development of the stock market is positively associated with long-run output, both at the aggregate level and for the manufacturing sector, whereas banking sector development is found to be important for service sector output.

Thesis advisor: Fabio Ghironi / My doctoral dissertation studies the interaction between financial development, exchange rate regimes and productivity growth. The first chapter provides a microfounded, quantitative model that rationalizes recent empirical evidence by Aghion et al (2009), who find that fixed exchange rate regimes lead to higher long-run productivity growth in countries with low financial development, while the effect in financially developed countries is insignificant. The channel that explains this evidence in my model is the following: A fixed exchange rate regime leads to lower inflation when the money growth is otherwise high. In turn, lower inflation results in higher long-run productivity growth since financial intermediaries hold a fraction of deposits as reserves, whose return is lower than the market rate and, thus, is affected by inflation. The lower return paid on reserves drives a wedge between the return paid on deposits and the return paid on loans by reducing the former and increasing the latter. In turn, this reduces entry of new innovators in the economy and, consequently, productivity growth. I show that the negative effect of flexible exchange rate regimes on growth is larger for countries with lower levels of financial development because inflation and the fraction of deposits held as reserves are higher in these countries. In the second chapter, I perform panel-data analysis to find how much of the effect of exchange rate regimes on productivity growth, documented previously by Aghion et al. (2009), can be accounted for by the channel proposed in the first chapter of my dissertation. I use data for 83 countries over the period 1960-2000. The data comes from the Penn World Table, World Development Indicators, International Financial Statistics, and the Reinhart and Rogoff classification of exchange rate regimes. I use the GMM system estimator and regress productivity growth on financial development, a variable describing the exchange rate regime, growth controls, as well as bank reserve ratios. I find that when the interaction effect of inflation and financial development or the interaction of the reserve ratio and financial development are added to the regression used by Aghion et al. (2009), the exchange rate regime effect on productivity growth in less financially developed countries is no longer significant. This implies that the channel proposed in the first chapter of my dissertation can explain most of the initial empirical results. The third chapter explores the short-run effect of exchange rate regimes on the macroeconomic performance of a small open economy with endogenous productivity growth and underdeveloped financial markets when the home economy is subject to shocks. I use the model introduced in the first chapter, add nominal price rigidities, and calculate impulse responses, given a productivity shock and a shock to the foreign nominal interest rate. I also calculate second moments implied by the model and compare them to empirical second moments. The results show that after a positive exogenous productivity shock, productivity growth, output and consumption increase more under the flexible exchange rate regime. However, given an increase in the foreign nominal interest rate, productivity growth falls but the reduction in productivity growth is smaller under the fixed exchange rate regime. In addition, output and consumption fall after the shock, however, the reduction of consumption and output is higher under the fixed exchange rate regime. I also find that after both shocks analyzed here, welfare is higher under the fixed exchange rate regime. The model is also able to match some features of business cycles in developing countries. / Thesis (PhD) — Boston College, 2011. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

Yes / We conduct a meta-analysis of the literature of financial development and economic growth. We cover a large number of empirical studies and estimations that have been published in journal articles. We measure the degree of heterogeneity and identify the causes of the observed differentiation. Among the most significant factors behind this heterogeneity is the choice of financial-variable proxies, the kind of data used as well as whether a study takes into account the issue of endogeneity. Our results suggest that the empirical literature on the finance–growth nexus is not free from publication bias. Also, a genuine positive effect exists between financial development and economic growth.

Economic integration starts to be achieved faster through the international labor mobility than due to international trade or capital movements. Remittances, important international capital flows, became one of the most discussed topics in world. The migrant's transfers have become the primary source of existence in Moldova. This paper using data on transfer of funds for the period 1995-2010, attempts to examine the relationship between remittances and financial development, economic growth and investment level of Republic of Moldova. The main finding of this study is that remittances influence significantly the economic growth, the investment level. Moreover, these funds substitute for a shortage of development of the financial system and therefore promote growth. Keywords: Remittances, migrant, financial development, investment, economic growth, formal and informal channel. Author's e-mail: oti_marculescu@mail.ru Supervisor's e-mail: cahlik@fsv.cuni.cz

Remittances were calculated to be approximately $318 billion in 2007, which is an increase of three times the amount of $102 billion in 1995, having these funds to become the second largest type of flows after foreign direct investment. The South-Eastern and Eastern-European countries welcomed 12% of the world’s remittances inflows in 2007, totalling $37 billion. The impact of remittances on financial development of the South-Eastern and Eastern-European countries for the period 1994 – 2007 is studied and it is examined whether these funds contribute to increasing the aggregate level of deposits and credits intermediated by the local banking sector. Financial development is measured in two ways, either as bank deposits or as bank credits to private investors. In order to analyze this effect panel data analysis is performed. Fixed effect regressions are performed to test for the effect of remittances on bank deposits and bank credits to private investors. The findings indicate that remittances have a robust positive effect on promoting financial development in South-Eastern and Eastern-European countries. It is observed that the effect on bank deposits is less robust than the effect on bank credits to private investors.