Frequency vs. Size of Bank Fines in Local Credit Markets

We examine how banking supervisors affect credit at the local level by charging fines to individual banks. Using a macro approach to capture the direct effect on the fined bank and the indirect effect on the other banks operating in the local credit market, we estimate reputational, reallocation and balance sheet effects on Italian provinces over the period 2005–2016 by a fixed effects model and instrumental variables. Provincial gross bank loans expand after a fine independently of its size. The impact of fine frequency depends on the size of the provincial banking sector, but neither on bank governance/ownership nor crises. No statistically significant evidence supports reputational or balance sheet effects. Instead, our results suggest that it would behoove bank supervisors to favor frequency over size of bank fines. Bank fines seem to work more like a good housekeeping seal of approval, enhancing transparency and effective banking practices.

USING EXPONENTIAL SMOOTHING METHOD IN FORECASTING DOMESTIC CREDIT TO PRIVATE SECTOR OF GHANA

The private sector of Ghana faces many problems with respect to raising capital for their operations; this is largely due to government relying heavily on the local credit market for funds for developmental projects. This study uses exponential smoothing method (ESM) in EViews to build a single sample model to forecast future domestic credit to private sector (DCPS) values in Ghana. Secondary annual data on DCPS spanning the period from 1982 to 2016 is used. The findings show that an exponential smoothing model with multiplicative error, additive trend and no seasonality fits the data best. The model had very small residual measures, which demonstrates a good model for forecasting. The estimated model is used to forecast the DCPS values for Ghana from the year 2017 to 2020. The results of this study will help private business people plan for the future. The results will also help policy makers to make informed decisions and formulate policies to improve the DCPS figures, since the private sector is the engine of growth, and crowding out would not be in the best interest of the government and the nation as a whole.

Trust, Norms of Cooperation, and the Rural Credit Market in Eighteenth-Century France

An examination of the loans recorded by the notary in the seigneurie of Delle during the eighteenth century sheds light on alterations to the mechanisms of trust. In early modern France, the traditional local credit market was based on strong norms of cooperation and reciprocity, in which trust was taken for granted. Changes in the nature of investors and investments during the eighteenth century, however, disturbed this fragile social equilibrium, causing trust to migrate in several new directions.