International Journal of Business, Economics and Management

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No. 5

The Effects of Macroeconomic Variables on Bank Default: A Case Study in Brazil

Pages: 310-330
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The Effects of Macroeconomic Variables on Bank Default: A Case Study in Brazil

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DOI: 10.18488/journal.62.2020.75.310.330

Mateus Feld , Wagner Eduardo Schuster

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Mateus Feld , Wagner Eduardo Schuster (2020). The Effects of Macroeconomic Variables on Bank Default: A Case Study in Brazil. International Journal of Business, Economics and Management, 7(5): 310-330. DOI: 10.18488/journal.62.2020.75.310.330
With the end of the recession from 2014 to 2016, Brazil began a gradual recovery process, with a positive impact on some economic variables — among them, credit financing. Despite this, a robust recovery was not seen in 2019, and 2020 was marked by the arrival of the Covid-19 pandemic, which raises questions about the stability of the financial system and the control of defaults. Considering this, the present study explores how macroeconomic variables affected the default of a financial institution’s credit portfolio between January 2014 and April 2019. To perform this analysis, we built a Vector Error Correction (VEC) model that captured the long-term relationships between the default of different credit products and the selected macroeconomic variables. The results indicate that the macroeconomic variables do in fact impact default, however, this behavior is not homogeneous. In general, different credit products respond in different ways to each of the macroeconomic entities: while part of our findings is in line with others in the literature, we also found surprising results for some of the studied relationships.
Contribution/ Originality
This study contributes to the existing literature by demonstrating, through a case study in Brazil, the unique effects of the macroeconomic environment on the default of different and specific credit products, while most of the recent research focuses on aggregated data or default indexes.

Interest Rate Ceilings and Financial Exclusion in Kenya: Evidence from Commercial Banks’ Sectoral Credit Distribution

Pages: 301-309
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Interest Rate Ceilings and Financial Exclusion in Kenya: Evidence from Commercial Banks’ Sectoral Credit Distribution

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DOI: 10.18488/journal.62.2020.75.301.309

Loice Koskei

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Loice Koskei (2020). Interest Rate Ceilings and Financial Exclusion in Kenya: Evidence from Commercial Banks’ Sectoral Credit Distribution. International Journal of Business, Economics and Management, 7(5): 301-309. DOI: 10.18488/journal.62.2020.75.301.309
The Finance Act that was amended in November 2019 in Kenya saw the removal of the caps on interest charged on loans. The motive of repeal of interest rate caps was to encourage the commercial banks to offer credit to Micro, Small and Medium Enterprises (MSMEs) and other sectors of the economy. The interest rate caps that were implemented in September 2016 led to a significant reduction in lending to the private sector and in particular the small and medium size enterprises and the rural poor which were financially excluded by commercial banks. The main objective of the study was to find out whether interest rate caps contributed to financial exclusion in Kenya’s commercial banks’ sectoral credit portfolio. The target population of the study was 11 private sectors that benefit from commercial banks credit in Kenya. Secondary balanced panel monthly data spanning from January 2016 to December 2019 was used in the study. Fixed effects panel data regression model was used to analyze the data. The results from the study showed a positive and statistically significant relationship between interest rate ceiling and financial exclusion implying that interest rate ceilings affects credit access leading to financial exclusion in Kenya. The results for inflation rate indicated a negative but statistically significant relationship between inflation and financial exclusion implying that inflation affects loan credit growth. The results for exchange rate and public debt are statistically insignificant, suggesting that they do not have an effect on credit access in Kenya’s commercial banks.
Contribution/ Originality
This study is one of very few studies which have investigated on the effect of interest rate ceilings on financial exclusion in Kenya by focusing on stock of credit to private sector using fixed effects panel data regression model.

Exchange Rate Volatility and Agricultural Commodity Prices i Nigeria (2000-2018)

Pages: 290-300
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Exchange Rate Volatility and Agricultural Commodity Prices i Nigeria (2000-2018)

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DOI: 10.18488/journal.62.2020.75.290.300

Dangok, Makrop Daniel , Ige, Olaoluwa Tosin

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Dangok, Makrop Daniel , Ige, Olaoluwa Tosin (2020). Exchange Rate Volatility and Agricultural Commodity Prices i Nigeria (2000-2018). International Journal of Business, Economics and Management, 7(5): 290-300. DOI: 10.18488/journal.62.2020.75.290.300
Exchange rate stability is one of the main factors that promote investment, price stability and stable economic growth. However, the effect of positive and negative changes in exchange rate has been a controversial debate among academia and experts. Thus, this study seeks to examine the effect of exchange rate volatility on agricultural commodity prices in Nigeria. Additionally, the study examines whether exchange rate volatility have a symmetric or asymmetric effect on agricultural commodity prices in Nigeria. In order to account for the volatility behaviour such as nonlinearity and time varying risk, the study used the Non-linear Autoregressive Distributed Lag (NARDL) model with monthly data for real effective exchange rate, agricultural output prices, inflation rate, and RGDP between 2000 and 2018. The study found that there is a positive and significant relationship between positive changes in exchange rate and agricultural commodity prices and also between negative changes in exchange rate and agricultural commodity prices. The study found that inflation rate has negative effect on agricultural commodity prices while RGDP has a positive effect on it. Asymmetric test using Wald Statistics revealed that positive and negative changes in exchange rate of the same magnitude have equal impact on agricultural commodity prices. The study concluded that movement of the exchange rate plays a significant role in altering the prices of agricultural commodity in Nigeria and the volatility effect is symmetric on agricultural commodity prices in Nigeria.
Contribution/ Originality
This study contributes to the existing literature in terms of symmetric effect of exchange rate volatility on agricultural commodity prices. It uses Non-linear Autoregressive Distributed Lag (NARDL) model. The paper's primary contribution is finding that exchange rate volatility have positive and significant effect on agricultural prices while RGDP effects is positive.

The Impact of Economic Growth, Oil Price, and Financial Globalization Uncertainty on Financial Development: Evidence from Selected Leading African Countries

Pages: 274-289
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The Impact of Economic Growth, Oil Price, and Financial Globalization Uncertainty on Financial Development: Evidence from Selected Leading African Countries

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DOI: 10.18488/journal.62.2020.75.274.289

Ibrahim Sambo Farouq , Zunaidah Sulong

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Ibrahim Sambo Farouq , Zunaidah Sulong (2020). The Impact of Economic Growth, Oil Price, and Financial Globalization Uncertainty on Financial Development: Evidence from Selected Leading African Countries. International Journal of Business, Economics and Management, 7(5): 274-289. DOI: 10.18488/journal.62.2020.75.274.289
A lack of financial scope has for long hinders the efficiency of the financial system in the African continent. In this paper, we investigate the effects of economic growth, oil price, and financial globalization uncertainty on financial development in six selected leading African countries, covering the period between 1976–2018. After the preliminary tests that confirmed the application of heterogeneous panel techniques, the paper was able used Larsson co-integration to establish the presence of long-run relationship among the variables, which the co-integration result confirms that. We further deployed Dynamic Common Correlated Effect (DCCE) for the elasticity estimation. The findings of the study based on the empirical analysis observed that both economic growth, financial globalization uncertainty and oil price affects the financial system of the sampled countries positively and statistically significant. We therefore, recommends that the sampled economies’ policymakers should strategize and come up with suitable policies that will promote substantial economic growth, attracts more foreign investors and continue to be resilient in times of financial shocks.
Contribution/ Originality
This study contributes to the literature by analyzing the impact of economic growth, oil price, and financial globalization uncertainty on financial development in six selected leading African countries.

Self-Efficacy and Entrepreneurial Mindset: Towards Societal Re-Engineering

Pages: 261-273
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Self-Efficacy and Entrepreneurial Mindset: Towards Societal Re-Engineering

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DOI: 10.18488/journal.62.2020.75.261.273

Agbonna Adedayo Racheal , Agbonna Rasheed Obarinu

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Agbonna Adedayo Racheal , Agbonna Rasheed Obarinu (2020). Self-Efficacy and Entrepreneurial Mindset: Towards Societal Re-Engineering. International Journal of Business, Economics and Management, 7(5): 261-273. DOI: 10.18488/journal.62.2020.75.261.273
Entrepreneurship is a derivative of entrepreneurial learning which promotes functional unemployment reduction through university education. However, universities in Nigeria have turned to producers of unemployed graduates instead of job creators in the face of high rate of global unemployment. This is due to the non appreciation of entrepreneurship among university undergraduates in Nigeria. Few studies have been conducted on the effect of self-efficacy and entrepreneurial mindset for societal, re-engineering with most scholars concentrating on entrepreneurship and economic growth. This study adopted survey research design. The population comprised of 25,353 four hundred level undergraduates in all Federal Universities in South-West, Nigeria. The sample size of 1,673 was obtained using Krejcie and Morgan formula. Stratified random sampling technique was adopted in selecting the respondents. A validated structured questionnaire with Cronbach’s alpha reliability coefficients for the constructs ranging from 0.73 to 0.95 was employed in the study. The response rate was 76.91%. The study adopted stratified random sampling technique and a structured questionnaire with 6-point Likert scale was used for data collection). Self-efficacy had a significant effect on mindsets towards entrepreneurship (R2 = 0.238, t(1671) =22.843, ? = 1.029, p<0.05).The study recommended that, government, academia and the society should focus on measure to promote university undergraduates’ self-efficacy.
Contribution/ Originality
The study contributes to literature by affirming the applicability of the social learning theory by Bandura which supports the finding of this study that undergraduates with a higher self-efficacy for entrepreneurship participate more readily, work harder, persist longer when they encounter difficulties and achieve at a higher level.