Course 2025-2026 a.y.

Classes: 31 (I sem.)

Instructors:
Class 31: NICOLA LIMODIO

There is no specific background knowledge required to attend the course. However, it is recommended that students regularly follow news related to financial markets and institutions in emerging markets through major international outlets such as the Financial Times, The Economist, or Bloomberg. Additionally, familiarity with selected readings from leading academic publications in economics and finance, such as the top 5 journals in economics (Quarterly Journal of Economics, American Economic Review, Econometrica, Journal of Political Economy and Review of Economic Studies) and the top 3 journals in finance (Journal of Finance, Review of Financial Studies, Journal of Financial Economics), may help students engage more effectively with the course material.

This course provides an in-depth exploration of financial markets and their role in driving development. Students will examine the structure and composition of financial markets with a focus on emerging markets, including banking systems, bond and stock markets, microfinance institutions, development banks, payment systems and more. The course will address key topics such as financial regulation, financial inclusion, and the impact of financial technologies on market development. Through the study of theoretical frameworks, case studies and empirical analysis, students will gain a comprehensive understanding of the challenges and opportunities within the financial sectors in contributing to broader development goals.

The course will revolve around six topics that will be explored in detail:

 

    Structure and Composition of Financial Markets in Emerging Economies: Overview of financial markets, including banking systems, bond markets, stock markets, and the role they play in economic development.

 

    Banking and Financial Regulation: Explore the regulatory frameworks governing banks and other financial institutions, with a focus on maintaining stability and promoting growth in emerging markets.

 

    Bonds and Stock Markets: Understand the dynamics of bond and stock markets in emerging economies, their challenges, and their role in mobilizing resources for development.

 

    Microfinance and Financial Inclusion: Examine microfinance institutions and their impact on increasing access to financial services for underserved populations, limits and challenges, novel work on innovative microfinance tools

 

    Mobile Money and Financial Technologies: Analyze the mobile money and the role of financial technologies (FinTech) in expanding financial services, improving efficiency, and fostering financial inclusion.

 

    Development Banks and Other Financial Institutions: Study the functioning and financing of development banks and other financial institutions, their structure, assets, liabilities and governance.

 

At the end of the course student will be able to...

By the end of the course, students will be able to:

• Describe the structure and functioning of financial markets in emerging and developing economies, including their key actors, instruments, and institutional frameworks.

• Explain the channels through which financial development can influence economic growth, firm investment and productivity.

• Analyze the role of commercial banks, central banks, and non-bank financial institutions in mobilizing savings, allocating credit, and managing financial risk.

• Evaluate the design and effectiveness of financial regulation and supervision in the context of developing economies, with particular attention to prudential norms, capital requirements, and consumer protection.

• Interpret the implications of introducing or expanding specific financial instruments (e.g., microcredit, government bonds, mobile money) on household behavior, firm performance, and public finance.

• Assess the developmental impact of financial innovations and technologies, such as digital payment platforms, fintech solutions, and mobile banking, using both theoretical and empirical perspectives.

• Compare and contrast the institutional and policy environments across countries to understand the diverse pathways and constraints to financial sector development.

• Summarize and discuss key academic debates and empirical findings related to finance and development, drawing from recent research in economics and finance journals.

 

At the end of the course student will be able to...

By the end of the course, students will be able to:

 

• Apply theoretical frameworks and empirical tools to evaluate the functioning of financial markets in emerging and developing economies.

• Critically assess the incentives, behaviors, and interactions of key financial actors—such as banks, investors, regulators, and governments—and how these shape financial outcomes and development trajectories.

• Formulate reasoned analyses of financial strategies and policies, considering both their intended goals and potential unintended consequences in low- and middle-income countries.

• Interpret and evaluate real-world case studies and data related to financial inclusion, credit access, capital market development, and regulatory reforms, using evidence-based reasoning.

• Design simple empirical investigations or policy briefs that diagnose financial sector problems and propose actionable solutions grounded in academic research and real-world constraints.

• Synthesize qualitative and quantitative information from multiple sources to form coherent and well-substantiated arguments on issues such as fintech regulation, sovereign debt risks, or the role of international financial institutions.

• Collaborate effectively in group settings to research, discuss, and present findings on complex financial topics, demonstrating strong teamwork and shared problem-solving abilities.

• Communicate analytical insights clearly and persuasively in both written and oral form, adapting the message appropriately for academic, professional, or policy-oriented audiences.

• Exercise judgment in addressing ambiguous or multifaceted financial problems, recognizing the importance of local institutional contexts, data limitations, and political economy considerations.

 

• Lectures
• Guest speaker's talks (in class or in distance)
• Practical Exercises
• Individual works / Assignments

1) Guest Lectures

Guest lectures are integrated throughout the course to provide students with first-hand insights from practitioners, policymakers, and researchers working at the intersection of finance and development. These sessions complement the core material by presenting real-world cases and institutional perspectives, particularly from emerging and developing economies. Guest speakers may include representatives from development banks, central banks, financial instutitions, market operators, tech companies like Bloomberg, fintech startups, and international organizations such as the World Bank or IMF. Their participation is designed to enrich students’ understanding of contemporary challenges and innovations in the field.

 

2) Practical Exercises

Practical exercises are designed to help students apply theoretical concepts to real-world scenarios using data-driven methods. These exercises may involve interpreting and analyzing financial data from developing countries, replicating empirical findings from key academic papers, or solving case studies on policy interventions and financial market development. The exercises are conducted both in class and as homework assignments, and they often make use of simple programming or statistical tools (e.g., Stata, R, or Python), although no prior coding experience is required.

 

3) Individual Assignments

Individual assignments focus on students' independent engagement with the course material. These may include short essays, policy memos, or critical reflections on assigned readings. Each assignment is designed to deepen analytical thinking, improve academic writing skills, and encourage students to draw connections between theory and current events. The topics often invite students to explore financial development trends in a country or region of their choice, assess the impact of a specific financial innovation, or evaluate policy tools used in financial inclusion.

 

4) Group Assignments

Group assignments are a core component of the course and promote collaboration among students with diverse academic backgrounds. These projects typically involve conducting a mini-research study or preparing a case-based presentation on a selected topic such as mobile banking in Sub-Saharan Africa, microfinance impact evaluations, or capital market development in Asia. Groups are expected to synthesize literature, analyze data where appropriate, and present their findings both in written form and through oral presentations. Peer feedback is incorporated to enhance learning outcomes and teamwork skills.

	Continuous assessment	Partial exams	General exam
Written individual exam (traditional/online)			x
Individual Works/ Assignment (report, exercise, presentation, project work etc.)	x
Collaborative Works / Assignment (report, exercise, presentation, project work etc.)	x
Active class participation (virtual, attendance)	x
Peer evaluation	x

For attending students, the evaluation is based on a combination of individual and group assessments, designed to measure the acquisition of knowledge, analytical skills, and the ability to apply concepts to real-world finance and development challenges. The assessment structure is as follows:

 

• Written Individual Exam (60%)
  The written exam consists primarily of closed-answer questions (e.g., multiple-choice and short-answer questions) and aims to assess students’ understanding of the theoretical frameworks, institutional features, and empirical findings discussed throughout the course. It verifies the achievement of learning outcomes related to knowledge and understanding of financial systems in emerging markets, as well as the ability to critically interpret and compare core concepts.

• Individual Assignment / Report (10%)
  This component requires students to write an analytical report or policy memo on a selected topic within the field of finance and development. It tests students’ ability to apply knowledge independently, synthesize information, and formulate arguments using data and academic literature. It reflects the expected outcomes in terms of critical thinking and academic writing.

• Collaborative Assignment / Group Presentation and Peer Evaluation (20%)
  Students work in small groups to prepare a case-based presentation or mini-research project, which is then delivered in class. This assignment evaluates their ability to collaborate, research, and communicate findings effectively, while demonstrating their understanding of specific topics through practical and contextualized examples. It also assesses transversal skills such as teamwork and oral communication. Each student assesses also the work of the other students in the group to avoid free riding.

• Active Class Participation (10%)
  Participation is measured through engagement in discussions, responses to cold calls, and contribution to class debates or practical exercises. It reflects students’ preparedness, their capacity to engage critically with course content, and their ability to communicate insights clearly. It also encourages consistent learning and reflection throughout the term.

This multi-dimensional evaluation framework ensures a comprehensive assessment of both content mastery and skill development, aligning with the course’s learning objectives.

Non-attending students will be evaluated exclusively through a Written Individual Exam, which is designed to comprehensively assess their understanding of the course material, including additional readings provided specifically for independent study. The structure and function of this evaluation method are as follows:

• Written Individual Exam (100%)
  The exam consists of closed-answer questions (e.g., multiple-choice and short-answer formats) and is structured to assess the full range of learning outcomes, from core knowledge and theoretical understanding to the ability to critically analyze and apply concepts related to financial markets and institutions in emerging economies.

  To ensure parity with attending students, the exam for non-attending students includes additional readings not discussed in class. These readings are required to bridge the gap in classroom content and must be studied independently. They allow non-attending students to demonstrate a comparable level of engagement with both the theoretical foundations and empirical applications of finance and development.

  The exam tests students' abilities to:

  • Understand and explain key concepts, institutional arrangements, and policy debates.

  • Apply knowledge to analyze financial sector dynamics and their development implications.

  • Critically assess strategies, interventions, and the role of different stakeholders.

This method provides a rigorous and self-contained assessment of students’ preparedness and capacity to engage with the subject matter at a high level, despite not attending regular lectures.

The core teaching materials for the course will include a selection of academic articles, policy reports, and textbook chapters covering key topics in finance and development. A preliminary list of references is available below and this list is not exhaustive, as additional readings—such as recent research papers, case studies, and multimedia resources—may be introduced during the semester to reflect ongoing developments and deepen understanding of specific themes. Any new material will be promptly communicated to students and made accessible in a timely manner through the course website or email announcements. Students are not required to purchase a specific textbook, but are expected to engage actively with the assigned materials.

 

References:

 

• Acemoglu, Daron, and Fabrizio Zilibotti. "Was Prometheus unbound by chance? Risk, diversification, and growth." Journal of political economy 105.4 (1997): 709-751.
• Aghion, Philippe, Peter Howitt, and David Mayer-Foulkes. "The effect of financial development on convergence: Theory and evidence." The quarterly journal of economics 120.1 (2005): 173-222.
• Allen, Franklin, et al. "The African financial development gap." (2010).
• Banerjee, Abhijit V., and Andrew F. Newman. "Occupational choice and the process of development." Journal of political economy 101.2 (1993): 274-298.
• Banerjee, Abhijit V., and Esther Duflo. "Do firms want to borrow more? Testing credit constraints using a directed lending program." Review of Economic Studies 81.2 (2014): 572-607.
• Barboni, Giorgia, and Parul Agarwal. "Knowing what’s good for you: Can a repayment flexibility option in microfinance contracts improve repayment rates and business outcomes." International Growth Centre, Working Paper F-89219-INC-1. London: IGC. (2018).
• Beck, Thorsten, and Ross Levine, eds. Handbook of finance and development. Cheltenham, UK: Edward Elgar Publishing, 2018.
• Beck, Thorsten, Asli Demirgüç-Kunt, and Ross Levine. "Finance, inequality and the poor." Journal of economic growth 12 (2007): 27-49.
• Bencivenga, Valerie R., and Bruce D. Smith. "Deficits, inflation, and the banking system in developing countries: The optimal degree of financial repression." Oxford Economic Papers 44.4 (1992): 767-790.
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• Breza, Emily, and Cynthia Kinnan. "Measuring the equilibrium impacts of credit: Evidence from the Indian microfinance crisis." The Quarterly Journal of Economics 136.3 (2021): 1447-1497.
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• Citaristi, Ileana. "African Development Bank—AfDB." The Europa Directory of International Organizations 2022. Routledge, 2022. 417-423.
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• De Mel, Suresh, David McKenzie, and Christopher Woodruff. "Returns to capital in microenterprises: evidence from a field experiment." The quarterly journal of Economics 123.4 (2008): 1329-1372.
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• Demirgüç-Kunt, Aslı, T. H. L. Beck, and Patrick Honohan. Finance for all?: Policies and pitfalls in expanding access. World bank, 2008
• Dos Santos, Amanda. "The Development of Domestic Bond Markets." (2024).
• D’Andrea, Angelo, and Nicola Limodio. "High-speed internet, financial technology, and banking." Management Science 70.2 (2024): 773-798.
• Eichengreen, Barry, and Pipat Luengnaruemitchai. "Why doesn't Asia have bigger bond markets?." (2004).
• Feigenberg, Benjamin, Erica Field, and Rohini Pande. "The economic returns to social interaction: Experimental evidence from microfinance." Review of Economic Studies 80.4 (2013): 1459-1483.
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• Gyntelberg, Jacob, Guonan Ma, and Eli Remolona. "Developing corporate bond markets in Asia." BIS Papers 26 (2006): 13-21.
• Higgins, Sean. "Financial technology adoption: Network externalities of cashless payments in mexico." American Economic Review 114.11 (2024): 3469-3512.
• IFA, WG. "Recent development of local currency bond markets in emerging economies." Staff Note (2018).
• Khwaja, Asim Ijaz, and Atif Mian. "Tracing the impact of bank liquidity shocks: Evidence from an emerging market." American Economic Review 98.4 (2008): 1413-1442.
• King, Robert G., and Ross Levine. "Finance and growth: Schumpeter might be right." The quarterly journal of economics 108.3 (1993): 717-737.
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• Laeven, Mr Luc. "The development of local capital markets: rationale and challenges." (2014).
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• Meager, Rachael. "Understanding the average impact of microcredit expansions: A Bayesian hierarchical analysis of seven randomized experiments." American Economic Journal: Applied Economics 11.1 (2019): 57-91.
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• Roul, Avilash. "Asian Development Bank (ADB)." The Palgrave Encyclopedia of Global Security Studies. Cham: Springer International Publishing, 2023. 81-86.
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