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A banking system is essential for financial stability, especially economic growth and development. The authors investigate the dynamic linkage of key banking system stability measures, namely, liquidity, capital, profitability, and credit risk. To this end, the authors employ Panel Vector Autoregressive (VAR) to a panel data set of country-level banking system indicators from seven developing countries; from March 2010 to December 2020 (308 country quarter observations). A nation is selected on the basis of similar characteristics large and bank-based economy with the considerably same stage of economic development. The authors find a remarkable resilient feature of the banking system in which both liquidity risk and credit risk appears significant only in the short run (within three quarters). Shocks from both risk sources dissipate quickly, suggesting an internal mechanism is at work. This study provides evidence of how a good performance of financial safety net should be.

This chapter applies the five drivers of productivity framework to regional microdata for Egypt and extends it by introducing an index of industrial clusters as an explanatory factor of the productivity performance of local private sector firms. Applying structural equation models, the geographic concentration of sectoral economic activity is found to have a positive and statistically significant effect on labor productivity. The transmission mechanism is conjectured to be the positive spillovers that are created, which local firms can tap into. In contrast, a higher concentration of skilled workers in an industrial sector in a region is associated with lower levels of labor productivity – a finding that suggests there may be structural deficiencies in the allocation of skilled workers. Regional policy should focus on net investments in gross capital formation throughout the country, for which the national and regional governments should improve how public investments are managed and the institutional framework – including the rule of law, bureaucracy and red tape, conflict of interest, transparency, and governance – so that private investment (both local and foreign) may substantially increase.

The world’s so-called developed countries of the West have long economic and political history compared to those of the East. The developed countries are far away from today’s developing countries in terms of aggregate income, aggregate capital formation, total number of human capital, etc. Though some countries from the East have outpaced some of the Western countries in terms of gross domestic product (GDP), aggregate bank credit and capital formation, in the twenty-first century, such as China and India, they are far behind in terms of per capita income, per capita financial facilities and per capita capital stock. On the other hand, the countries from the East, except a few one, are also well lagging behind their Western counterparts in the level of human development. With the theme of the book on the growth and developmental aspects of credit allocations, the present chapter makes an introduction to the subject area by means of credit histories in the selected 10 countries and their phase-wise levels of GDP, credit and Human Development Index (HDI). The figures for GDP, credit and HDI reflect the rising trends in GDP and credit for all in the entire phase but there are some downfalls in the GDP and credit during the phase of the global financial crisis. Besides, it observes rising trends of HDI in all the countries but the rates of rise are more in the case of the developing countries. There are thus the possibilities of getting correlations among the different pairs of the variables across the countries.