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Rentabilidad bancaria y desarrollo económico en el siglo XXI: una relación controvertida a nivel mundial
[Bank profitability and economic development in the 21st century: a controversial relationship worldwide]

Author

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  • Jiménez Sotelo, Renzo

Abstract

This article contains an essay on the negative empirical relationship between bank profitability and economic development. The working hypothesis is that this relationship is caused by the social (in)efficiency with which the different banking sectors operate. The argument uses public information from the first two decades of the 21st century for almost one hundred and a half countries on the five continents. The topic, although it may seem very specialized, is of general interest. Firstly, because, within the current capitalist economic system, almost no sector of the economy can remain outside the world of finance. And secondly, because the profitability of the financial sector, as a whole, is the result of the degree of (in)efficiency with which it provides its services to the rest of the economic sectors. In theory, financial companies, in general, and banking companies, in particular, should mediate the greatest amount of funds possible in order to be able to more efficiently fulfill their central function (facilitate the allocation and deployment of the economic resources existing in each country), which enables greater economic development. To this end, banks must: (i) encourage the greatest possible domestic savings and (ii) finance investment in all low-risk projects, since high-risk projects require other types of financiers, or even partners. However, banking sectors stop operating as efficiently as they could when, in order to increase their profitability, they widen the differentials between their interest rates as much as possible, or even encourage the partial dollarization with which they operate. These practices mean that: (i) savings in national currency are discouraged by the low real returns provided to savers, (ii) low-risk projects are not financially viable, since, by their nature, they have lower returns, and (iii) economies are more vulnerable to the unpredictable change in the risk appetite of foreign capital and its overflow through the evolution of the exchange rate.

Suggested Citation

  • Jiménez Sotelo, Renzo, 2024. "Rentabilidad bancaria y desarrollo económico en el siglo XXI: una relación controvertida a nivel mundial [Bank profitability and economic development in the 21st century: a controversial relationsh," MPRA Paper 122367, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:122367
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    References listed on IDEAS

    as
    1. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393, Elsevier.
    2. Renzo Jiménez Sotelo, 2010. "Ciclo crediticio y acelerador cambiario: evidencia empírica y consecuencias para la regulación prudencial," Revista Economía, Fondo Editorial - Pontificia Universidad Católica del Perú, vol. 33(65), pages 133-176.
    3. Emanuel Kohlscheen & Andrés Murcia Pabón & Juan Contreras, 2018. "Determinants of bank profitability in emerging markets," BIS Working Papers 686, Bank for International Settlements.
    4. Jiménez-Sotelo, Renzo A., 2023. "La influencia del mercado de deuda pública interna en el desarrollo financiero: evidencia de 52 países en 1990-2020," El Trimestre Económico, Fondo de Cultura Económica, vol. 90(359), pages 773-804, julio-sep.
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    More about this item

    Keywords

    Banking; business cycle; financial development; banking spread; income equity; financial system.;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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