Template-type: ReDIF-Paper 1.0
Author-Name: Nicola Limodio
Author-Name: Francesco Strobbe
Title: Financial Regulation and Government Revenue: The Effects of a Policy Change in Ethiopia
Abstract: Financial regulation can generate government revenue by imposing the quantity and price of government bonds. We study an unexpected banking regulation introduced in 2011 by the Ethiopian Central Bank, forcing commercial banks to purchase a negative-yield government bond. High-frequency bank data and public finances documentation allow tracking the subsequent government revenue gain. This policy is compared to three alternatives: raising funds competitively on international markets; distorting the state- owned bank lending; and raising deposits through state-owned bank branches. Our results suggest that the revenue gain is moderate (1.5-2.6% of tax revenue); banks amass more bonds; their profitability slows without turning negative (from 10% to 2%).
Classification-JEL:G38, H20, H25, G21, O55
Keywords: Financial Regulation, Government Revenue, Bank Taxes, Banks, Ethiopia
Length: 24 pages 
Number: 1880
Creation-Date: 2018
File-URL: https://repec.unibocconi.it/baffic/baf/papers/cbafwp1880.pdf
File-Format: application/pdf
File-Size: 204
Handle: RePEc:baf:cbafwp:cbafwp1880