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Using cross-country and panel regressions, the authors show that financial sector development significantly reduces undernourishment (hunger), largely through gaining farmers and others access to productivity-enhancing equipment, translating into beneficial income and general effects. They show specifically that a deeper financial sector leads to higher agricultural productivity, including higher cereal yields, through increased fertilizer and tractor use. Higher productivity in turn leads to lower undernourishment. The results are robust to various specifications and econometric tests and imply that a 1 percentage point increase in private credit to GDP reduces undernourishment by 0.22-2.45 percentage points, or about one-quarter the impact of GDP per capita.

Banks and Banking Reform --- Consumption --- Consumption Levels --- Cred Development --- Debt Markets --- Economic Growth --- Economic Theory and Research --- Extreme Poverty --- Finance and Financial Sector Development --- Financial Literacy --- Financial Sector --- GDP --- GDP Per Capita --- Income --- Inflation --- Macroeconomics and Economic Growth --- Per Capita Income --- Poverty Reduction --- Prices --- Pro-Poor Growth --- Production --- Productivity --- Purchasing Power --- Rural Development --- Rural Poverty Reduction --- Trade --- Value --- Value Added --- Variables

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Using cross-country and panel regressions, the authors show that financial sector development significantly reduces undernourishment (hunger), largely through gaining farmers and others access to productivity-enhancing equipment, translating into beneficial income and general effects. They show specifically that a deeper financial sector leads to higher agricultural productivity, including higher cereal yields, through increased fertilizer and tractor use. Higher productivity in turn leads to lower undernourishment. The results are robust to various specifications and econometric tests and imply that a 1 percentage point increase in private credit to GDP reduces undernourishment by 0.22-2.45 percentage points, or about one-quarter the impact of GDP per capita.

Banks and Banking Reform --- Consumption --- Consumption Levels --- Cred Development --- Debt Markets --- Economic Growth --- Economic Theory and Research --- Extreme Poverty --- Finance and Financial Sector Development --- Financial Literacy --- Financial Sector --- GDP --- GDP Per Capita --- Income --- Inflation --- Macroeconomics and Economic Growth --- Per Capita Income --- Poverty Reduction --- Prices --- Pro-Poor Growth --- Production --- Productivity --- Purchasing Power --- Rural Development --- Rural Poverty Reduction --- Trade --- Value --- Value Added --- Variables

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Laeven, Klingebiel, and Kroszner investigate the link between financial crises and industry growth. They analyze data from 19 industrial and developing countries that have experienced financial crises during the past 30 years to investigate how financial crises affect sectors dependent on external sources of finance. Specifically, the authors examine whether the impact of a financial crisis on externally dependent sectors varies with the depth of the financial system. They find that sectors highly dependent on external finance tend to experience a greater contraction of value added during a crisis in deeper financial systems than in countries with shallower financial systems. They hypothesize that the deepening of the financial system allows sectors dependent on external finance to obtain relatively more external funding in normal periods, so a crisis in such countries would have a disproportionately negative effect on externally dependent sectors. In contrast, since externally dependent firms tend to obtain relatively less external financing in shallower financial systems (and hence have relatively lower growth rates in such countries during normal times), a crisis in such countries has less of a disproportionately negative effect on the growth of externally dependent sectors. This paper-a product of the Financial Sector Strategy and Policy Department-is part of a larger effort in the department to study the link between financial development and economic growth. The authors may be contacted at llaeven@worldbank.org, dklingebiel@worldbank.org, or randy.kroszner@gsb.uchicago.edu.

Adverse Consequences --- Adverse Effects --- Adverse Selection --- Bank Lending --- Banks and Banking Reform --- Cred Development --- Debt Markets --- Economic Growth --- Economic Research --- Economic Theory and Research --- Emerging Markets --- Finance and Financial Sector Development --- Financial Crises --- Financial Crisis --- Financial Literacy --- Financial Sector --- Inequality --- Investment and Investment Climate --- Labor Policies --- Liquidity --- Macroeconomic Management --- Macroeconomics and Economic Growth --- Markets --- Monetary Policy --- Moral Hazard --- Poverty Reduction --- Private Sector Development --- Pro-Poor Growth --- Social Protections and Labor --- Total Factor Productivity --- Total Factor Productivity Growth --- Trade --- Value --- Value Added

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November 1999 - Land registration in Thailand has significant positive long-run effects on financial development and economic growth. Using an economywide conceptual framework, the author analyzes how land registration affects financial development and economic growth in Thailand. He uses contemporary techniques, such as error correction and co-integration, to deal with such problems as time-series data not being stationary. He also uses the auto-regressive distributed lag model to analyze long lags in output response to changes in land registration. His key findings: Land titling has significant positive long-run effects on financial development; Economic growth responds to land titling following a J curve, by first registering a fall and recovering gradually, thereafter to post a long, strong rally; The quality of land registration services, as measured by public spending on land registration, has strongly positive and significant long-run effects on economic growth. This paper - a product of the Rural Development and Natural Resources Sector Unit, East Asia and Pacific Region - is part of a larger effort in the region to increase the effectiveness of country assistance strategies in the area of property rights and economic development. The author may be contacted at fbyamugisha@worldbank.org.

Banks and Banking Reform --- Climate Change --- Communities & Human Settlements --- Cred Development --- Debt Markets --- Economic Growth --- Economic Historians --- Economic Theory and Research --- Environment --- Equations --- Finance and Financial Sector Development --- Financial Crisis --- GDP Per Capita --- Incentives --- Inequality --- Investment --- Land Use and Policies --- Liquidity --- Macroeconomics and Economic Growth --- Markets --- Natural Resources --- Poverty Reduction --- Private Property --- Pro-Poor Growth --- Productivity --- Property Rights --- Public Sector Economics and Finance --- Real GDP --- Regression Analysis --- Rural Development --- Rural Land Policies for Poverty Reduction --- Theory --- Value --- Variables