Four essays on financial systems and economic performance

Ayana Aga, Gemechu (2012) Four essays on financial systems and economic performance. Doctoral thesis (PhD), University of Sussex.

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Abstract

This thesis analyses the causes and consequences of access to credit by small-
scale enterprises in developing countries and the design of optimal financial systems.
The first essay explores the link between informality and access to external finance
by Small and Microenterprises (MSEs). A probit model is estimated using data on
MSEs from Ethiopia. The results show that informality plays an important role in
a firm's access to credit. Specifically, informal firms are about sixteen percentage
points more likely to be credit constrained than their formal counterparts. The
second essay examines the consequence of credit constraints on a firm's innovation
using the same data on MSEs from Ethiopia. We construct a measure of innovation
exploiting a question in the survey that asks whether a firm has engaged in some
form of innovation or not. Employing various estimation methods to deal with the
possible endogeneity of access to credit, the results show that access to credit has a
significant and positive effect on a firm's propensity to engage in innovative activi-
ties. The third essay examines whether opening a stock exchange boosts per capita
income growth in Sub-saharan Africa countries (SSA). Employing a semi-parametric
Difference-in-Difference (DiD), i.e., a DiD on a set of matched countries, we show
that opening a stock exchange does not appear to have a significant impact on eco-
nomic growth in SSA as well as in other developing countries in other regions. The
fourth essay studies whether the structure of the economy determines the evolution
of the optimal structure of the financial system. Employing a measure of economic
structure constructed based on a country's comparative advantage and using an in-
novative instrumentation strategy to deal with the possible endogeneity of economic
structure, the essay shows that the structure of the economy exerts a first-order
causal effect on the evolution of the structure of a country's financial system

Item Type: Thesis (Doctoral)
Schools and Departments: School of Business, Management and Economics > Economics
Subjects: H Social Sciences > HG Finance
Depositing User: Library Cataloguing
Date Deposited: 22 Jan 2013 13:12
Last Modified: 08 Sep 2015 13:47
URI: http://sro.sussex.ac.uk/id/eprint/43339

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