Victor Murinde

• PhD
• Professor at University of Birmingham

Financial development and trade play crucial roles in fostering economic growth and development. The present chapter provides an overview of the existing research pertaining to the relationship and causal link between financial development and trade, as well as their consequential effects on economic growth. In addition to examining the mechanisms...

Advances in information and communication technology (ICT) have provided a platform for the introduction and diffusion of a range of financial technologies that have transformed the financial sector. This study analyses the diffusion of financial technology (fintech) and its interaction with financial inclusion and living standards (GDP per capita)...

We investigate the impact of the recent rise of Pan-African banks, which are indigenous African banks with cross-border networks, on banking sector stability within the West African Economic and Monetary Union (WAEMU). We contextualise this problem in terms of the long-standing unresolved controversy in the banking literature, between the competiti...

This chapter seeks to code the milestones on the epic journey of central banking from the initial conditions, through the transition, to modern policy and practice today, in a global context and Kenyan perspective. It is argued that although developments in economic theory, evidence, and policy have entrenched the robustness of central banking toda...

The chapter covers central bank independence broadly and makes use of rich literature to bring out key issues on central bank independence from the inception of central banking in 1668 to the twenty-first century. The chapter identifies four measures of central bank independence mainly focusing on legal characteristics. The findings of the study po...

This book documents important milestones in the epic journey traversed by the Central Bank of Kenya over the last 50 years, putting into perspective the evolution of central banking globally and within the East African region, and contemplating future prospects and challenges. The book is timely, mainly because the global financial landscape has sh...

Although theory suggests that financial market imperfections – mainly information asymmetries, market segmentation and transaction costs – prevent poor people from escaping poverty by limiting their access to formal financial services, new financial technologies (FinTech) are seen as key enablers of financial inclusion. Indeed, the UN 2030 Agenda f...

This chapter summarizes our reflections on microfinance, at theoretical and empirical levels. We examine the impact of microfinance on poverty reduction and review formal versus informal credit markets, regulatory and governance issues, competition and performance. We conclude by identifying promising research ideas for future research, including t...

This paper explores the key issues relating to financial sector policies for enterprise development, with special implications for Africa. The role of the formal financial sector – ranging from microfinance institutions, banks, the capital market, and regulatory agencies – is discussed with respect to enterprise development at all levels, including...

This study investigates the transmission channels through which the exchange rate fluctuations pass into stock prices in the UK. Based on share valuation models, including free cash flow model and residual earnings model, cost of equity and cash flows or companies’ earnings are recognized as potential channels of stock price responsiveness to excha...

This paper aims to survey existing research on financial development and economic growth, highlighting the theoretical models and evidence from recent empirical work. Emphasis is placed on the flow-of-funds story (finance matters for economic growth). It is noted that recent evidence is weighted in favour of the argument that financial development,...

This paper critically surveys the key literature on corporate financing policy, capital structure and firm ownership in order to identify the leading theoretical and empirical issues in this area. The theoretical component of the survey attempts to reconcile competing theories of capital structure and appraises recent models which use agency theory...

This article studies household portfolio behaviour for a group of Middle East economies, namely Israel, Jordan and Turkey. Panel unit root and cointegration tests are used to investigate the convergence of household portfolio behaviour; and asset demand equations are estimated in a novel way of comparing the three countries using the Seemingly Unre...

We seek to evaluate the competitiveness of British banking in the presence of cross-selling and switching costs during 1993-2008. We estimate a model of banking behaviour that encompasses switching costs as well as cross-selling of loans and off-balance sheet transactions. The evidence from panel estimation of the model lends support to our theoret...

We investigate the relative long run growth impact of each of the two main types of Africa's private capital inflows, namely Foreign Direct Investment (FDI) and Cross-Border Bank Lending (CROSSBANK). In addition to controlling for some factors (e.g. financial reforms and trade openness), we isolate the outcomes for four groups: (1) all the African...

This paper investigates the impact of corporate financing patterns in the European Union (EU) on macroeconomic volatility. We examine macroeconomic data for eight EU countries. We find that during the period 1990 through 2005 bank financing was positively associated with volatility in GDP, consumption and investment. On the other hand, macroeconomi...

  We investigate the interrelationships among bank competition, risk taking and efficiency during banking sector reforms in Nigeria (1993–2008). Our modelling procedure involves three stages: we measure bank productive efficiency, using data envelopment analysis, and the evolution of bank competition, using conjectural variations (CV) methods; then...

Smoothing – Evidence from China This study aims to examine empirically whether ownership structure and corporate governance mechanisms affect income-smoothing behavior in China. The sample comprises 1353 companies listed in the Shanghai Stock Exchange and the Shenzhen Stock Market during the period 1999 to 2006. By comparing the variability of inco...

This paper investigates the patterns of corporate financing by banks, bond markets and stock markets in the European Union (EU). Specifically, the paper seeks to determine whether the European economies are converging towards an Anglo-Saxon (capital- market-oriented) or a continental (bank-oriented) financial system. Panel unit root tests and GMM r...

We investigate the impact of the March 1995 move to screen-based trading on the Mumbai Stock Exchange, using separate samples of more liquid (A) and less liquid (B) shares. Following the move, the average cumulative abnormal return for A shares was 4.5%, whereas that for B shares was over 12%; market liquidity and efficiency increased but the effec...

The capital structure and dividend policy in UK-listed firms are simultaneously determined and dividend decisions better monitored with a low individual shareholding and a high proportion of institutional ownership.

We propose a three-stage procedure for investigating the interrelationships among bank competition, risk taking and efficiency. The procedure is applied to Nigeria’s banking reforms (1993-2008). Stage I measures bank productive efficiency, using Data Envelopment Analysis, and the evolution of bank competition, using Conjectural Variations (CV) meth...

This paper uses the translog stochastic cost and profit frontier approach to measure the degree of x-inefficiency in a panel of 89 commercial banks drawn from nine Sub-Saharan African countries, covering the period 1992-99. The paper then models the determinants of x-inefficiency in terms of bank-specific factors and general macroeconomic variables...

Among policy circles, as well as the research community, a lot of heated debate has been generated regarding the impact of foreign direct investment (FDI) in the domestic banking sector of developing and transition economies. While there are many plausible arguments in favour of a policy of openness to FDI, there are also some concerns over the pot...

Taxation has potentially important implications for corporate behaviour. However, there have been few studies of the impact of taxation on companies in developing countries, and fewer still concerned with unquoted companies. In this paper, we study the impact of tax policy on the financial decisions of a sample of unquoted companies in India during...

The motivation of this paper is that information problems and other market imperfections, which explain the business group phenomenon of firm ownership structure in emerging markets, also underpin mainstream theories of firm leverage. We draw from elements of theories of business groups as well as capital structure theories to specify a generic mod...

The paper examines consolidation episodes in the EU since 1970 with a view to shedding light on the factors that determine the success or failure of fiscal adjustment. Compared to the existing literature on successful fiscal consolidations we add a number of new dimensions. Two deserve particular attention. Firstly, we explore a broader set of pote...

This paper examines the ways in which financial sector development policy might contribute to poverty reduction, particularly by supporting the growth of micro and small enterprises (MSEs). Specifically, the paper draws on case studies and empirical work on the changing role of MSEs in the development process and the access of MSEs to informal and...

We apply stochastic simulation methods to a system-wide flow of funds model for India for 1951–1994. We address two issues; first, the impact of financial reforms on interest rates and loanable funds, and second, the robustness of policy where there is uncertainty about the true model. We find considerable variation in policy risk depending on the...

This paper investigates the linear as well as non-linear properties of the relationship between the entry of foreign-owned private banks and changes in gross domestic investment. A standard model of aggregate investment behaviour, in which an indicator for foreign banks is one of the determinants, is estimated and tested on a cross-section of data...

This paper offers the first attempt to test the inverted-U hypothesis for the effect of uncertainty on investment, implied by a number of recent theoretical studies, using a panel of UK firms. It is found that the effect of uncertainty on corporate investment is indeed approximated by an inverted-U shaped relationship: at low levels of uncertainty...

We undertake an empirical assessment of the competitiveness and market contestability of the major British banks post-1980 - a period of major structural changes, mergers, demutualizations and acquisitions. Specifically, we estimate and test the Rosse-Panzar model on a panel of 12 banks for the period 1980-2004; furthermore, we buttress the Rosse-P...

Besides reacting to economic shocks such as the Asian and Latin-American financial crisis and the collapse of the European Eastern Bloc, the world of international banking has had to adapt to a major regulatory shock in recent years and is about to experience another. In the mid to late 1990's The World Trade Organisation attempted to liberalise tr...

We estimate a flow of funds model for the household sector in India, within the Almost Ideal Demand System (AIDS) framework, and examine the demand for money and the substitution effects between money and other financial assets. The restricted long-run model, obtained using cointegration techniques, provides stable equilibrium relationship between...

In this new book a group of 18 distinguished authors presents comprehensive surveys of current issues in the field of finance and development... This book nicely bridges the gap between general research on the role of finance for economic growth and the role finance plays for developing economies and poverty reduction... Moreover, the authors ident...

The paper investigates the possibility of convergence in the European Union (EU) in terms of the patterns of corporate financing by banks, bond markets, and stock markets; and in the context of whether the economies are converging towards an Anglo-Saxon (capital-market-oriented) or a continental (bank-oriented) financial system. GMM estimation of a...

We model the efficiency of domestic and foreign banks in Central and Eastern Europe, in terms of economies of scale and scope. We estimate and test the model on a panel of 273 foreign and domestic banks located in nine European transition economies during 1995-99. The main findings are threefold. First, overall, banks in the sample economies exhibi...

Economics Research Paper, no.03-05 In this paper, we investigate the efficiency of banks in Central and Eastern Europe. The aim is to evaluate whether foreign-owned banks are more efficient than domestic banks and can therefore play a key role in energising the emerging financial systems in transition economies. Our measures of efficiency are based...

This paper analyses the financial performance of the African Development Bank. A two-pronged approach is applied. Firstly, we conduct a discussion of the role of development banks and the difficulties of finding an appropriate measure with which to assess their performance. Secondly, we develop a data set of the balance sheet and income statements...

In this paper, we investigate price interactions between two main components of European emerging financial markets, namely the foreign exchange market and the stock market, before and after the adoption of the Euro by most European Union (EU) economies. We estimate and test a bivariate vector autoregressive model using daily observations on the st...

Capital flight remains one of the enigmatic policy and academic issues of the day. Although from the end of the 1980s and early 1990s the debt crisis appeared to be contained and attention to the capital flight phenomenon waned, capital flight still remains a serious problem in a number of countries.The most pronounced concern among policymakers, r...

This paper provides a selective survey of the leading theoretical and empirical issues surrounding the flow of funds: its meaning and origin, problems of construction, its use in financial modelling and its role as a tool of analysis of intersectoral financial flows. It is argued that there is an intimate connection between the flow of funds, inter...

Economics Research Paper, no. 02-04 In this paper, we document the financial structure of a large sample of Indian companies using a unique new company accounts dataset. The data form a panel consisting of the published accounts of more than 1000 Indian companies that reported every year during the period 1989- 1999. They consist of non-financial c...

In this paper, we focus on how the stock markets in Africa have responded to the reform process. We identify three main types of reforms implemented in these markets since the 1990s, namely revitalization of the regulatory framework, modernization of trading systems, and relaxation of restrictions on foreign investors. We invoke market microstructu...

In this paper we assess the implications of the World Trade Organisation (WTO) and the General Agreement on Trade in Services (GATS) for the banking sector in African signatory countries. With emphasis on the free trade element, we first review the relevant provisions of the GATS for banking services and the main exemptions held by African countrie...

We utilize a unique comprehensive dataset, drawn from the 1999 baseline survey of some 2000 micro and small-scale enterprises (MSEs) in Kenya. We analyze the financing behavior of these enterprises within the framework of a heterodox model of debt-equity and gearing decisions. We also study determinants of the success rate of loan applications. Our...

In this paper we evaluate the contributions of human capital and financial development to economic growth in a panel of 82 countries covering 21 years. The main innovations in the paper stem from the fact that we use a translog production function as a framework for estimating the relationships among economic growth and factor inputs. The factor in...

In this paper, we review the theoretical and empirical literature on capital flight. First, we discuss the measurement of capital flight. Next, we provide information on the magnitude as well as the 'burden' of capital flight for a selected set of developing countries in four regions of the world (South Asia, East Asia, Sub-Saharan Africa and Latin...

This paper investigates the effect of demand uncertainty on the capital–labour ratio of non-financial firms in Poland. An eclectic model is used to characterise a utility maximising firm in a transition economy with demand uncertainty and imperfect competition. It is assumed that labour is completely variable and capital is quasi-fixed. The demand...

the interpretations and conclusions expressed in this paper are entirely those of the authors and should not be attributed in any manner to DFID. 1. Background Policy Issues Banks and organised capital markets play an important role in enterprise financing because of lack of full information on the credit standings of borrowers. 1 In this context,...

To be able to finance their physical assets and working capital costs, business schools mainly raise funds from any or a combination of the following: direct funding by the public sector or the government; income from providing educational services; debt (bank and bond); equity by private owners; public-private partnerships; research grants; and pr...

In this paper, stock market volatility in the East European emerging markets of Hungary and Poland is investigated using daily indexes. The results suggest the presence of non-linearity in the indexes through the BDSL statistic, while the presence of conditional heteroscedasticity is detected through LM tests. Conditional volatility is then modelle...

This paper investigates the main features of stock market volatility in the emerging markets of European transition economies using daily indexes. Starting with the universe of all stock markets in the transition economies, we use the criterion of data availability to obtain a sample of six stock markets, namely the markets in Croatia, Czech Republ...

In this paper, we consider the construction of flow of funds data in a small sample of developing economies, which are the subjects of a general research programme for which this paper serves in part as background: Bangladesh, India, Sri Lanka, Kenya, Tanzania, Uganda and Zambia. We develop a simplified internationally comparable framework for the...

This paper provides a selective survey of the leading theoretical and empirical issues surrounding the flow of funds: its meaning and origin, problems of construction, and more particularly the key issues involved in financial modelling. It is argued that there is an intimate connection between the flow of funds, interest rate and asset price deter...

This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection a...

This paper provides the first serious attempt to examine the relationship between political risk and capital flight for a large set of developing countries. The outcomes of the analysis show that in most cases political risk variables do have a statistically robust relationship to capital flight once domestic and international macroeconomic circums...

Although it is agreed that the dual development of monetary integration and territorial enlargement are likely to generate profound effects on European spatial structure, in both West and East, much uncertainty centres around the question of what changes will be brought about. This book furthers our economic understanding of the opportunities and c...

Recent literature draws a distinction between Anglo-Saxon (capital market oriented) financial systems, as represented by the UK, and Continental (banking oriented) financial systems, as typified by Germany (Doukas, Murinde and Wihlborg 1998). It is useful, however, to note that in a conventional sense the term ‘banking’ involves bank lending via th...

This paper investigates the effect of demand uncertainty on the capital-labour ratio of non-financial firms in Poland in order to infer the firms’ risk behaviour. A generic model is used to characterise a utility maximising firm in a transition economy with demand uncertainty and imperfect competition. It is assumed that labour is completely variab...

This paper tests the extent to which convergence has been occurring between EU member states in the sources of funding for investment by non-financial corporations. The evidence from time series on 9 EU member countries during 1971-1996 suggests that bank lending (credit) remains the most important source of external financing, although internal fi...

In this paper we assess the effects of financial liberalization on capital flight in African economies. A portfolio model, in which capital flight is one of the assets, is estimated on a sample of nine African countries for 1970–91. The estimation results suggest that financial liberalization induces a reduction in capital flight. After augmenting...

The authors propose a macroeconomic model suitable for policy analysis for an emerging market economy (EME). The model neither uncritically applies conventional macrotheory nor departs altogether from orthodoxy; rather, it modifies the conventional framework and captures the distinctive features of EMEs. The structure of the model is reduced to thr...

This paper analyses retrospectively the financial performance of the East African Development Bank. Three methods of analysis, derived from a selective review of the literature, are applied, namely the standard financial ratios; statistical moments such as the mean, range and standard deviation of balance sheet and related accounts; and the Subsidy...

Interactions are investigated between exchange rates and stock prices in the emerging financial markets of India, Korea, Pakistan and the Philippines. The motivation is to establish the causal linkages between leading prices in the foreign exchange market and the stock market; the linkages have implications for the ongoing attempts to develop stock...

This paper investigates the causal relationship between budget deficits, money growth and inflation in a group of countries in which a 'print-to-spend' policy characteristically supplants conventional monetary and fiscal policies, versus a control group of monetary union countries. Cointegration and error-correction procedures are applied to test a...