The impact of regulatory capital pressure on profitability and risk: Evidence from Tunisian banks

Rim Zakraoui, Dorra Mezzez Hmaied

The paper analyses the effect of regulatory pressure on bank behaviour, using a sample of Tunisian banks covering the period 2005-2020. Firstly, the paper examines the impact of regulatory capital on bank profitability and risk. Secondly, it contributes to the literature which has received scant attention from researchers investigating the nonlinear impact of regulatory pressure on bank behaviour. Thirdly, we consider different determinants of bank profitability and risk. Finally, we use both static and dynamic models to test for the persistence of bank profitability and risk, as well as to make sure that the results are not biased by endogeneity. The results suggest that regulatory capital pressure improves bank profitability and stability. This effect is, however, conditioned by the existence of a certain threshold, after which stringent capital regulation may have adverse effects. Our results have important policy implications on optimal bank capital regulation.

Exchange Rate Pass-Through, Inflation and Monetary Policy in Egypt

Athar Elnagger, Christian Richter

The role of exchange rate pass-through has been dominating the heated debates over effective monetary policies, as well as exchange rate regime in general equilibrium models. Empirical literature from developed economies has shown evidence that the pass-through to prices can be incomplete in many cases. These studies have indicated that there are substantial differences between countries. Due to the lack of empirical literature for developing countries, this research contributes to the field by examining the exchange rate pass-through in Egypt from 2005 to 2018, using nine endogenous variable Vector Auto-regressive Models (VAR); this research estimates the degree and the size of exchange rate pass-through to domestic prices. In addition, we use a reduced two-dimensional VAR to estimate once for the relation between inflation (CPI) and money supply (M2) and once for the relation between inflation (CPI) and imports, along with Granger causality test to investigate causality between two variables. In the last part of the analysis, we investigate the exchange rate pass-through to inflation (CPI) in Egypt before floatation from December 2005 until October 2016 and the post floatation period, which is from November 2016 until February 2018. The results have important implications for the ability of Egypt to achieve an effective inflation-targeting regime.

Exogenous vs. Endogenous Obstacles to Funding Female Entrepreneurs in MENA Countries (2013-2019)

Imène Berguiga, Philippe Adair

Do female entrepreneurs in MENA countries face obstacles to funding their businesses, either through self-selection or discrimination? A literature review reveals controversial evidence thereof but, to date, no paper has tackled this funding issue for female entrepreneurs in MENA countries from a dynamic perspective. Three pooled samples, from the 2013 and 2019 World Bank Enterprise Survey (WBES), and a cohort over 2013-2020, include three North African countries (Egypt, Morocco and Tunisia) and three Middle East countries (Jordan, Lebanon and Palestine); they document the financial behaviour of both owners and managers, according to gender. Probit regressions address loan demand (including Heckman probit) and loan supply, with respect to self-selection versus discrimination. In 2013, there is neither self-selection nor discrimination for female entrepreneurs, whereas female entrepreneurs are prone to self-selection in 2019, compared to their male counterparts. Self-selection behaviour from the demand side does not result from discrimination on the supply side. Sampling biases in the WBES, together with the characteristics of female clients of microfinance institutions, suggest that micro-entrepreneurs would have experienced self-selection and, possibly discrimination, regarding credit.

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