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Amr Hosny
A recent World Bank enterprise survey identified access to finance as the top constraint to Doing Business in Nigeria. In this context, the objective of this paper is two-fold: (i) study firm characteristics associated with more access to finance and export diversification; and (ii) quantify the impact of these structural obstacles on firm performance. Results suggest that (i) larger and export-oriented firms are about 40 percentage points less likely to report access to finance as a business obstacle, while firms perceiving access to finance as a constraint are, on average, about 10-40 percentage points less likely to be export-oriented diversified firms; and (ii) better access to finance and export diversification can help firm employment —as much as 80 percent higher— and capacity utilization. Results are largely robust to different specifications and estimation methods.
International Monetary Fund
"Diversification of the GCC economies, supported by greater openness to trade and higher foreign investment, can have a large impact on growth. Such measures can support higher, sustained, and more inclusive growth by improving the allocation of resources across sectors and producers, creating jobs, triggering technology spillovers, promoting knowledge, creating a more competitive business environment, and enhancing productivity. The GCC countries are open to trade, but much less so to foreign direct investment (FDI). GCC foreign trade has been expanding robustly, but FDI inflows have stalled in recent years despite policy efforts taken to reduce administrative barriers and provide incentives to attract FDI. Tariffs are relatively low; however, a number of non-tariff barriers to trade persist and there are substantial restrictions on foreign ownership of businesses and real estate. The growth impact of closing export and FDI gaps could be significant. In most countries, the biggest boost to growth would come from closing the FDI gap—up to one percentage point increase in real non-oil per capita GDP growth. Closing export gaps could provide an additional growth dividend in the range of 0.2-0.5 percentage point. Boosting non-oil exports and attracting more FDI requires a supportive policy environment. Policy priorities are to upgrade human capital, increase productivity and competitiveness, improve the business climate, and reduce remaining barriers to foreign trade and investment. Specifically, continued reforms in the following areas will be important: • Human capital development: continue with investments made to raise educational quality to provide knowledge and skills upgrade. • Labor market reforms: aim to improve productivity and boost competitiveness of the non-oil economy. • Legal frameworks: ensure predictability and protection; efforts should include enhancing minority investor protection and dispute resolution; implementing anti-bribery and integrity measures. • Business climate reforms: focus on further liberalizing foreign ownership regulations and strengthening corporate governance; and on further reducing non-tariff trade barriers by streamlining and automating border procedures and streamlining administrative processes for issuing permits."
Vito Amendolagine, Mr. Andrea F Presbitero, Roberta Rabellotti, Marco Sanfilippo, and Adnan Seric
The local sourcing of intermediate products is one the main channels for foreign direct investment (FDI) spillovers. This paper investigates whether and how participation and positioning in the global value chains (GVCs) of host countries is associated to local sourcing by foreign investors. Matching two firm-level data sets of 19 Sub-Saharan African countries and Vietnam to country-sector level measures of GVC involvement, we find that more intense GVC participation and upstream specialization are associated to a higher share of inputs sourced locally by foreign investors. These effects are larger in countries with stronger rule of law and better education.
International Monetary Fund. African Dept.
This paper discusses Tanzania’s Sixth Review Under the Policy Support Instrument (PSI) and Request for a Six-Month Extension of the PSI. Tanzania’s macroeconomic performance has been strong, albeit with a recent deceleration in economic growth. Program performance under the PSI has been broadly satisfactory. Most quantitative targets for December 2016 and March 2017 were met. Although progress in structural reforms identified under the program has been generally slow, the authorities have stepped up efforts to advance them. The IMF staff supports the authorities’ request for a 6-month extension of the PSI arrangement and recommends completion of its sixth review.
Mr. Tidiane Kinda
Using manufacturing and services firm-level data for 30 sub-Saharan African (SSA) countries, this paper shows that taxation is not a significant driver for the location of foreign firms in SSA, while other investment climate factors, such as infrastructure, human capital, and insitutions, are. By analyzing disaggregate FDI data, the paper establishes that, while there is considerable contrast in behavior between vertical FDI (foreign firms producing for export) and horizontal FDI (foreign firms producing for local markets), taxation is not a key determinant for either type of FDI. Horizontal FDI is attracted to areas with higher trade regulations, highlighting interest in protected markets. Furthermore, horizontal FDI is affected more by financing and human capital constraints, and less by infrastructure and institutional constraints, than is vertical FDI.
Mr. JaeBin Ahn
This paper provides a theory model of trade finance to explain the "great trade collapse." The model shows that, first, the riskiness of international transactions rises relative to domestic transactions during economic downturns, and second, the exclusive use of a letter of credit in international transactions exacerbates a collapse in trade during a financial crisis. The basic model considers banks' optimal screening decisions in the presence of counterparty default risks. In equilibrium, banks will maintain a higher precision screening test for domestic firms and a lower precision screening test for foreign firms, which constitutes the main mechanism of the model.
International Monetary Fund
In this study, during 2008, the financial crisis lead Iceland’s public debt to soar from under 30 percent of GDP to more than 100 percent of GDP, and while underlying external debt came down sharply, it remains elevated at close to 300 percent of GDP. First, external sustainability is overviewed, and second, growth of Iceland’s economy has been challenged, and finally, fiscal adjustments and its macroeconomic impacts are overviewed. Traditional external debt sustainability analysis (DSA) suggests that Iceland’s external debt is sustainable but is vulnerable to depreciation shock.
International Monetary Fund
In recent years, the IMF has released a growing number of reports and other documents covering economic and financial developments and trends in member countries. Each report, prepared by a staff team after discussions with government officials, is published at the option of the member country.