Effect of credit supply constraint on labour productivity in Sub-Saharan Africa

Effect of foreign capital inflows on domestic credit to the private sector in sub‐Saharan Africa

“…Unlike the actual, the expected is obtained from the interest rate parity, reflecting the true risk associated with a financial asset, because it accounts for changes in an exchange rate. Taking the US‐T/bill from the actual lending rates gives the actual risk‐premium, whereas taking it from the lending rate parity gives the expected risk‐premium (WDI 2015; Acheampong 2019). From Table 3, the risk‐premiums are statistically insignificant in all the models.…”

“…Table 3 shows the results of the effects of FCI on domestic credit. This accounts for actual and expected risk‐premiums (Acheampong 2019). Unlike the actual, the expected is obtained from the interest rate parity, reflecting the true risk associated with a financial asset, because it accounts for changes in an exchange rate.…”

“…Moreover, we found a decrease in domestic credit as official credit inflows increased. The negative effect of official credit on domestic credit suggests that persistent official credit inflows are likely to increase SSA's foreign debt, and financing these debts requires considering the opportunity cost of curtailing essential projects such as recurrent healthcare and education services to the population to mobilize adequate funds to service the debt (Acheampong 2019). However, a decrease in essential projects may be welfare‐reducing.…”

“…Following Acheampong (2019), we compute risk‐premium indicators: the expected and actual risk‐premiums. He considered Copeland's (2000) interest rate parity expression on the assumption of a covered interest rate.…”