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This thesis consists of five core chapters focused on investigating nonlinearities arising from state dependence, threshold and asymmetric effects in the relationship among economic growth, financial instability and financial inclusion. The first paper sets the stage by inquiring whether the relationship between financial instability and economic growth changes with the business cycle. We find that (i) there is a long run relationship between financial instability and economic growth, (ii) the relationship is sensitive to the state of the economy, (iii) given a shock to the system, the speed at which adjustment to the long run equilibrium takes place varies across different quantiles of economic growth, and (iv) the interaction term between financial instability and financial inclusion has a non-trivial effect on output growth. These results highlight the need for (i) studies aimed at investigating finance-growth nexus to consider possible non-linearities arising from state-dependence, and (ii) state-specific, rather than 'all-seasons' policies for ameliorating the negative output effects of financial instability. In the second paper, we focus on the threshold effect of financial inclusion on the relationship between financial instability and economic growth. We find evidence of a 20 per cent financial inclusion threshold below which the effects of financial stability on economic growth is neutral, and above which the relationship between financial stability and output becomes non-trivial. Also, we confirm that financial instability generates negative output effects in Nigeria. These results imply that the level of financial inclusion matters for the effect of financial instability on economic performance. In the third paper, the study presented global evidence on the nexus between financial inclusion and economic growth using 153 countries across regions and various levels of development. Using a battery of linear (random effects) and non-linear (panel threshold) models, the study found that financial inclusion has a positive impact on economic growth in all situations. The magnitudes are greater for higher income countries and are also higher in non-fragile economies compared with low income and fragile economies. Furthermore, the results reveal that the nexus between financial inclusion and economic growth remains positive even in the face of undeniable threshold (nonlinear) effects. The threshold results shows that the magnitude of the positive impact of financial inclusion on grwoth appears to rise with higher levels of financial inclusions, although it declines with higher levels of financial development. The fourth paper accommodates the effects of the debt threshold in the relationship between financial instability and economic growth. Thus, we estimate a smooth transition growth model using debt as a transition variable and found that the level of debt matters for the nature of the relationship between financial instability and economic performance. The study found that in the lower debt regime, financial instability positively affects economic performance, while in the upper debt regime, it negatively affects the economy. This confirmed the presence of asymmetry across regimes. It was also found that the optimal debt-to-GDP ratio in Nigeria is around 55 per cent. In the final paper, we investigate the causal relationship between finance and economic growth while accounting for nonlinearities arising from threshold and asymmetric effects. We find evidence of three regimes in the growth model; and show that whereas financial inclusion has causal effect on economic performance in the second and third regimes, economic growth causes financial inclusion only in the second regime. On the other hand, there is no causal relationship between financial instability and economic growth in the second regime. Furthermore, our results confirm the presence of asymmetric effects as positive and negative variations in real GDP and financial inclusion generates varied effects on financial instability. Also, positive and negative variations in real GDP and financial instability lead to different impacts on financial inclusion. However, economic growth does not respond differently to positive and negative variations in the financial sector variables. Finally, we find evidence that positive shocks to financial inclusion elicit positive response in output, and such positive response is amplified during periods of high economic growth.

Business cycles in emerging market economies (EMEs) are characterised by strong volatility and procyclical exchange rates. This dissertation investigates the role of exchange rates in EM business cycles from a theoretical, empirical, and policy perspective. First, it provides a Minskyan open economy model in which exchange rate procyclicality is generated through the interaction of nominal exchange rates and investment spending. The model shows that when balance sheet effects from foreign currency debt and the important propensity are strong, endogenous cycles can emerge whose volatility increases when risk appetite for external debt rises. Second, the dissertation formalises and empirically tests three endogenous business cycle mechanisms from the Minskyan literature using bivariate vector-autoregressions. Three financial variables (the interest rate, external debt, the nominal exchange rate) and their cyclical interaction with output are tested for a data set of 13 EMEs over the period 1960-2017. There is evidence for a cycle mechanism (i) with nominal exchange rates in Chile, Israel, the Philippines and South Africa; (ii) with external debt in Mexico, the Philippines, and South Africa, and (iii) with interest rates in Argentina, Mexico, and South Africa. Third, the thesis tests the hypotheses that foreign exchange intervention (FXI) can stabilise (i) output and consumer prices and (ii) output and quity prices after external shocks. Estimating vector-autoregressions on data from 25 small open economies over the period 1990Q1-2017Q4, it employs a counterfactual analysis to assess the effectiveness of FXI on either prices or output in 21 out of 25 countries, and for a stabilising effect on share prices in 17 out of 23 counties. Overall, the thesis presents theoretical and empirical evidence that flexible exchange rates can be important drivers of EM business cycles and that exchange rate management can be stabilising.

We compare the forecasting performance of univariate and multivariate models for BRICS and OPEC economies. For the univariate models, we produce forecasts using ARIMAX models that have a deterministic component to account for structural breaks over the full sample period and different ARIMA specifications over a reduced sample period that avoids the modelling structural breaks. The univariate ARIMA models that we develop over the reduced sample period are, first, a seasonal ARIMA specification identified using the Box-Jenkins method, second, a seasonal ARIMA model identified using EView's automatic model selection tool and third, a non-seasonal ARIMA model identified using EView's automatic model selection tool applied to seasonally adjusted data. The other univariate model we considered include the regime shift threshold Autoregressive model (over the full sample and reduced sample) and the naïve model which added as a benchmark. Multivariate models are estimated over the reduced sample period to avoid modelling structural breaks and are based upon Vector Autoregression (VAR) models that utilise differencing and cointegrating restrictions to ensure the stationarity of the data. In particular, we consider the unrestricted VAR model with differenced (stationary) data, the (unrestricted) Vector Error Correction Model (VECM) that assumes cointegration without imposing cointegrating restrictions and the restricted VEC that imposes a single cointegrating equation on the VECM. Our study shows that the benchmark models (naïve) were never favoured over the best selected univariate and multivariate model. The univariate EView's automatic non-seasonal ARIMA model is generally favoured for the BRICS countries (the exception is South Africa). However, the results are mixed between univariate and multivariate methods for OPEC countries. For OPEC countries that have a history of moderate inflation, for example, Saudi Arabia, the univariate automatic non-seasonal ARIMA model outperforms the multivariate model. In contrast, multivariate models generally outperform univariate automatically selected ARIMA models for countries with high inflation (e.g Angola and Algeria).

In the short-run, there is not enough time for systemic feedback to organise and become a force. In this instance, it is appropriate to use models and theory underpinned by observed systemic causal links, such as supply and demand determining price. On the other hand, where there is enough time for complexity to become influential, the system might be best explored using complexity science. This work explores the fundamental forces arising from trade in the long-run, where there is enough time for complexity forces to become influential. The complexity research tool used was agent-based modelling. A simple trade model was created that can be fully explained in just a few lines of prose. Three areas of the economy were explored using this model with the following results: 1) In complex systems, long-run prices are shaped by the system's definition of evolutionary fitness regardless of supply and demand. 2) Econophysicists are condtionally correct in their hypothesis that money in a closed system maintains a Boltzmann-Gibbs distribution (0.5 Gini coefficient). 3) Experimentation with trade models support the Rand/Stonedahl experiments indicating that agent computational ability inversely correlates with efficiency. In addition to a simple trade model, a far more complex model was built that includes an environment with raw resources, agents who are labourers, business owners, and consumers. This model requires agents to successfully reproduce in order to avoid extinction. Almost all agent behaviour is governed by evolutionary variables. Using this model, it is also established that: 4) The behaviours established in simple trade model are maintained in a more complex model. 5) Long-term outcomes of economic models change as the nature of the population changes. 6) The nature of the economy can change the nature of the population. These last two points suggest that economic models using representative or eternal populations are not suitable for making conclusions concerning long-term economic theory or recommending policy. However, the most important finding is likely that price can be delinked from supply and demand in the long-run. Explanations for this result lie in the results of the other experiments that, together, build up our understanding of the foundational forces of trade in a complex system.

The need to tap private capital and expertise for the public-sector to concentrate on policy making are the chief reasons why governments across the globe are increasingly adopting the public-private partnership (PPP) model of infrastructure procurement. This research investigated the investment climate for PPP in Nigeria by examining the legal, institutional and regulatory structure in place for participation of the private sector in the procurement of infrastructure in the country to determine how the framework for PPP in the country stimulates or mars the success of PPP arrangements. The rational for the study is to develop mechanisms to enhance the interest of both local and foreign investors given the wide infrastructure gap in the country. The spate of project failures, mistrust by community stakeholders and disputes indicates that there is a lack of proper understanding of how PPPs can work in the country. To provide a workable framework, the study draws lessons from two other developing economies with similar federal structures like Nigeria. It is expected that the lessons derived from this research will form an instrument for Nigerian PPP policy framers to fashion a holistic framework to arouse private sector interest in PPP projects as well as assist government in the management of such arrangements in the country. Consequent upon the foregoing, this research supports community involvement in all PPP projects, respect for contracts by the public sector, reduction of the gestation period for contracts, limiting unnecessary bureaucracy as well as the encouragement of the growth of a local financial market base for private funding of infrastructure by means of PPP model of procurement.

This thesis assessed the hypothesis that the financial system and external openness were significant determinants of the post reform dynamics of the monetary transmission mechanism in Ghana, and the evolution in the Bank of Ghana's post reform monetary policy programming. Ghana underwent structural adjustment reform, which began in the mid 1980s. The reform was arguably the most significant structural reform programmed in its post-independence history, as it was designed to engender a shift from the pre-reform import substitution macroeconomic framework to a post reform liberalised, open economy. The reform motivated long term structural changes in key sectors of the economy, potentially including monetary transmission mechanism and monetary policy. Key aspects of the reform programme included; (1) financial structure reforms and financial sector liberalisation, (2) External openness liberalisation and (3) Monetary policy reforms. Theoretical consensus, as evidenced in the Post Keynesian and Open Economic conceptualisations, is that the nature and dynamics of the monetary transmission mechanism is determined by, amongst other factors, the institutional structure of the financial system and external openness. These theories further postulate that a Central bank's choice of, and effectiveness of its monetary policy framework(s) and policy tools, are determined by the structure and dynamics of the monetary transmission mechanism. By extension, a significant determinant of a Central bank's choice of policy frameworks and tools is the nature and dynamics of the financial system. The theoretical implications are that institutional and structural changes in a country's financial system and external openness will have long run implications for the dynamics of the monetary transmission mechanism, and well as motivate changes in a central bank's monetary policy frameworks and tools. This thesis tests these theoretical implication using Ghana's experience with the structural adjustment reforms as an event study. Firstly, the thesis tested the hypothesis that institutional and structural changes in financial structure and external openness were significant in explaining the long run dynamics of the monetary transmission mechanism in Ghana. To test this hypothesis, we first constructed a financial structure and external openness indices using Dynamic Factor Modelling techniques. Then a benchmark model and an augmented model are constructed and estimated. The structural dynamics of the monetary transmission mechanism is assessed using three tests; (a) significance of long run and short run causality running from monetary policy to the admissible variable, (b) significance structural change by conducting a structural break test (using likelihood ration test) on the augmented model and, (c) assessment of impulse responses of shocks in the financial structure and external openness indices. Secondly, in light of the institutionalised market based reforms of the financial system, the thesis also tested the hypothesis that this was significant in evolution to indirect monetary targeting and inflation targeting tools. Vector Autoregressive (VAR) models of the Bank of Ghana's inflation targeting and monetary targeting frameworks are estimated. Effectiveness of both policy tools are assessed by analysing causality (short run and long run) running from both policy tools (monetary policy rate and open market operations). In addition, responses to policy induced shocks in the Bank of Ghana's Monetary Policy Rate, and Open Market Operations are also assessed using Impulse Response Function (IRF) analysis. The overall empirical findings indicate that the structural adjustment reform, and the underlying financial system and external openness changes, were significant in the post reform dynamics of monetary transmission mechanism and monetary policy in Ghana. Both the banking sector and the post reform external openness had significant effects on GDP growth and inflation, indicating their important roles as systematic links between monetary policy and the post reform macroeconomy. The findings also suggest that development post reform financial structure motivated the observed post reform regime transitions in the Bank of Ghana's monetary policy frameworks from the direct regime to indirect institutionalised monetary targeting and inflation targeting regimes.

This thesis investigates the macroeconomic effects of domestic oil prices and international crude oil prices in Ghana. We investigate the ability of oil prices to influence economic growth in Ghana using annual data from 1971 to 2014. We also examine the possibility of shock spillover and volatility spillover effects from domestic and crude oil prices to the Ghana currency exchange rates and the Ghana stock market index using monthly data from January 1991 to December 2015. To conduct these investigations, this study employed various econometric techniques including; unit root testing, cointegration testing, vector autoregressive model (VAR), structural VAR (SVAR), vector error correction model (VECM), scenario-based dynamic forecasting, the autoregressive distributive lag (ARDL) specification, and the generalized autoregressive conditional heteroscedasticity (GARCH) BEKK model. Overall, this study seeks to address two central issues; i) whether domestic and world oil prices have the same effect on economic activities and financial variables in Ghana, and ii) whether the crude oil price and the macro economy relationship in Ghana is related to the treatment of crude oil prices as exogenous or endogenous. It is important to recognize the exogeneity of crude oil prices in the context of Ghana given the relatively small size of the Ghanaian economy. The findings suggest that the international crude oil price movements have an insignificant effect on output growth in Ghana both in the short run and in the long, regardless of whether the crude oil price is treated as exogenous or endogenous. However, domestic oil prices have a significant effect on the output growth rate only in the long run. The findings also indicate that world crude oil prices have significant spillover effects on the exchange rate, and this result is unaffected by the treatment of world crude oil prices as exogenous or endogenous. However, the relationship between crude oil prices and the Ghana stock market depends on whether the crude oil price is exogenous or endogenous. In addition, domestic oil prices have significant spillover effects on the exchange rate and the stock market. Domestic oil prices are also found to have more influence on the stock market than crude oil prices do. The results of this study have some implications for the government and investors; (i) Increases in crude oil prices do not put a binding constraint on the monetary authorities to loosen monetary policy to offset its effect on output. If inflation is a priority, policy makers could focus on inflation stabilization by tightening monetary policy during oil price rises. (ii) The government?s tax policies on petroleum products should not only be focused on revenue generation, but also on ensuring that such policies do not lead to exorbitant domestic oil prices since higher taxes on petroleum products will increase domestic oil prices which can be detrimental to the economy in the long term. (iii) The government should formulate transport-related policies such as promoting mass transportation or encouraging the use of electrically powered vehicles. The government can also encourage the use of renewable energy such as solar to help reduce the country?s dependence on oil (iv) Internationally diversified portfolio investors in Ghana should use hedging strategies such as currency forwards, futures, and options to protect their investments from exchange rate risk emanating from oil price shocks.

This study examines the effect of exchange rate changes on consumer prices in Nigeria by examining the magnitude and speed of exchange rate pass-through (ERPT) to consumer prices in Nigeria using quarterly time series data from 1986 to 2013. The study also examines the potential nonlinearities and asymmetries in the ERPT in Nigeria during the same period. The study used vector error correction model (VECM) and smooth transition autoregresive (STAR) model. The methodology employed, are free from some weaknesses of the previous empirical studies and contributed to the analysis of ERPT from a macroeconomic perspective. This study focuses on the macroeconomic perspective of the effect of ERPT which is more relevant for monetary policy. To design and implement an efficient monetary policy, theoritical and empirical knowledge of the ERPT to domestic consumer price is necessary. Similarly, the understanding of the level of ERPT to domestic consumer prices would offer more understanding of the international transmission of shocks and the efficiency of exchange rate policy measures on external adjustment. The study results show full and statistically significant ERPT in the long-run in Nigeria during the sample period. However, using linear model (VECM) the short-run estimate shows no significant ERPT in Nigeria. Whereas, the nonlinear STAR model shows significant ERPT even in the short-run in Nigeria. The results of the nonlinear model (STAR) show evidence of nonlinearities and asymmetries in the ERPT in Nigeria. The nonlinearities and asymmetries tend to be prevalent during periods of higher inflation and greater exchange movements when the changes in prices and exchange rates exceed certain thresholds. This study, therefore, confirms Taylor’s (2000) hypothesis that pass-through declines in low and stable inflation environment which create nonlinear ERPT. The result shows asymmetric ERPT to the direction of exchange rate change (appreciation or depreciation). The result also shows clear evidence of nonlinearity with respect to the size of the exchange rate change. This result is in line with the menu cost hypothesis where the importing firms do not transfer the exchange rate changes due to the cost of changing their menu. Therefore, the effect of the exchange rate changes on consumer price is minimal when the exchange rate changes are below the threshold level. The study also examined the output growth as a source of nonlinearities. However, the result does not show evidence of nonlinear ERPT due to the output level. The comparison of statistical test results of linear autoregressive (AR) and the nonlinear (STAR) model indicates that the nonlinear STAR model fits the data better than the linear AR model in all cases. The results of this study, therefore, show a significant impact of exchange rate changes on the domestic consumer price in both short run and long run. The asymmetric and nonlinear ERPT induced by the pricing behaviors of the importing firms also significantly influences the speed and magnitude of the ERPT to consumer prices in Nigeria.

This thesis investigates, theoretically and empirically, the impact of FDA and privatization on economic growth in Egypt and identifies the channels through which FDI affects economic growth over the period 1970-2015. In addition, the thesis investigates the impact of corruption on FDI in Egypt over the period 1970-2015. The literature survey in chapter two argues that both FDI and privatization increase the rate of economic growth, while corruption has a negative impact on FDI. After reviewing institutional and regulatory frameworks of FDI and privatization in Egypt in chapter three, the econometric framework of cointegration and error correction mechanism are used in chapter four to capture the linkages between FDI, privatization and economic growth in Egypt. Our results reveal that privatization has a positive effect on the long run economic growth in Egypt. The effect of FDI on economic growth, however, depends on the sectoral distribution of these FDI inflows. FDI inflows have a positive impact on the short run economic growth in Egypt. However, in the long run, FDI inflows indicate a negative, yet limited, impact on the economic growth as FDI inflows are concentrated in the primary sector, mainly the petroleum sector. Thus, we conclude that the focus of FDI policies in Egypt is misspecified. The challenge should not only be to attract FDI, but also to derive macroeconomic benefits from FDI by focusing on the sectors that derive positive spillovers of FDI. Finally, the determinants of FDI in Egypt are identified in chapter five to explore how corruption affects FDI inflows. The time series framework of cointegration and error correction mechanism are applied. Our results indicate a positive yet insignificant relationship between FDI and corruption in Egypt. Since corruption is not found to hinder FDI inflows, treating corruption should be based on sound legal procedures that infringe neither the freedom of FDI nor on the degree of openness of the economy, which are the real stimulants of FDI in Egypt.

Since energy price changes have been studies by much literature, this thesis tries to discuss it through the elasticity of substitution. More importantly, this thesis finds that the substitution effect itself cannot completely interpret the phenomenon of energy price changes. This is based on the results of the estimation of the AES, the MES and the CES, as well as some previous studies' results of negative substitution elasticities. This thesis adopts VECM, ADL and panel data as methodologies. Different data is also colelcted and analyzed. Most of the AES estimates are negative and the CES estimation shows many negative elasticities as well. The estimated elasticities from the MES and the Panel dta CES are positive. Out positive elasticities from the MES may are consistent with the previous literature that finds the MES estimation method is better than AES. The negative elasticities of susbtitution as the substitution effects are usually followed by income effects. Based on literature view, if income effects are involved in the energy price changes between energy exporting and importing countries, it may lead to new policy making and application. In addition, there are some other findings: (1) an application approach is used to test the cointegration when variables include I(0), I(1) and share variables. This approach is different from Pesaran, Shin and Smith's (2001) ARDL method which is involved I(0) and I(1) variables. However, in the application, the data being used covers share variables. Share variables sum to unity so they have collinearity. New procedures (ADL) are adopted to solve the problem of collinearity in econometric application. This then allows to analyze I(0), I(1) and share variables together in the model. This is one of our contributions in econometric VECM application. (2) By the literature review in Chapter 4, it's found that the elasticities of substitution vary from economies. Since some economies do not share free flow of capital, labor or energy, their substitution elasticities cannot be estimated as a whole. The different sustitution elasticities in each country show that, when selecting the data, we may refer to a region or a country with a common free flow market for capital, labor and energy. (3) Different data is used in the application. Previous literature uses the data of the UK or other countries to analyze the Allen's elasticity of substitution (AES), or the US data in the period different from that in this study, or uses the familiar data but in technology forecasting. Importantly, the empirical analysis uses the US data to test the Allen's elasticity of substitution (AES) and the constant elasticity of substitution (CES), in order to explore negative estimates of the substitution elasticity.

From a theoretical perspective, Islamic banking and finance is different from conventional banking and finance because interest (riba) is prohibited in Islam. The unique feature of Islamic banking and finance is its profit-and-loss sharing (PLS) paradigm. As such, the equity stock market mechanism follows this unique PLS paradigm without the involvement of riba, gharar and maysir, allowing Shari’a sensitive investors’ access to the stock market. But the problem is to identify the Shari’a compliant equity stocks (that are both Shari’a compliant in the capital structure as well as the underlying business) within the equity stock market. In order to assist the Shari’a sensitive investors, the Dow Jones Islamic Market Index (DJIMI) for the first time in history issued the first Shari’a screening methodology in 1999 that facilitated access to the stock market. Subsequently, a number of other Shari’a screening methodologies have been developed by other index providers, banks and regulators; all of them are derivatives of the DJIMI. The rules used in the screening process have not originated from the Holy Quran or the traditions of the Prophet Muhammad (PBUH), and accordingly are not considered absolute rules. These screening methodologies have been criticised in the literature for being imprecise, inconsistent, lacking credibility and on the use of Shari’a screening thresholds restricting the Shari’a non-compliant activities. The study is designed to address two main areas: 1) to examine the historical development of Shari’a screening methodologies to date, and 2) to investigate how the existing Shari’a screening methodologies can be enhanced for the benefit of the Islamic banking and finance (IBF) industry. A qualitative analysis is carried out in the first part of the study. A statistical technique of exploratory factor analysis (EFA) is carried out in the second part of the study. The examination of the first part of the study shows that the fundamental variables underlying existing screening methodologies should be based on actual interest income and interest expense as it’s the actual interest received or paid that is Shari’a non-compliant instead of on the basis of source of funds (debt, receivables). This part of the study also finds that the Shari’a screening methodologies were introduced as a need of the time under Maslahah (public interest and rule of exception). It was expected that scholars and practitioners would review and revise the screening methodologies over time to ensure adherence to Shari’a. However, they have remained the same while the Islamic banking and finance industry has developed significantly. Further examination of current practices, suggested Shari’a screening thresholds to be dynamic and ones based on the growth and development in Islamic banking and finance. Based on findings of the first part, the study conducted an exploratory analysis in the second part using different portfolios and screened them based on interest income and interest expense and compared with existing practices. It is recommended that Shari'a screening methodologies incorporate these screening filters in addition to the existing filters to ensure that the portfolio remains Shari'a compliant. Further, the study in the second part developed an IBF index using exploratory factor analysis to quantify the development in IBF industry in 41 countries. These countries were placed in five groups (leaders, developed countries, developing countries, emerging markets and least developed countries) and it was concluded that Shari’a screening thresholds for countries based in groups “leaders” and “developed countries” can be lowered to 20% and 25% respectively as the IBF industry in the underlying countries have developed significantly and there are sufficient Shari’a compliant stocks to provide the investor a diversified portfolio, while for other countries the existing thresholds should continue as the IBF industry in the country is still in early growth period and Islamic financing availability in the country is not adequate. In this way, the Shari’a compliant equity investments can go forward in a more effective manner and thus a move towards more dynamic and progressive screening methodologies, rather than the existing static ones.

This thesis investigates which factors drove the spectacular accumulation of household liabilities prior to the financial crisis of 2007/2008 in the United States and 12 other OECD countries. Two mechanisms are of particular interest. The first is the polarization in the distribution of income which can be observed since the 1980s in the United States and European OECD countries (Atkinson et al. 2011). The second mechanism is the increase in asset prices and in particular residential real estate prices, which is considered by some authors as a major explanation of household debt accumulation (Mian & Sufi 2011). Based on two different data sources, the Survey of Consumer Finances (SCF) and a macro panel of 13 OECD countries, an extremely robust result emerges: The residential housing market is the key driver of household debt accumulation. This finding strongly supports an asset-focused view of household sector debt and discourages explanations which rely on a direct link from the distribution of income to household indebtedness. There is some evidence that the income polarization contributed to higher debt-levels in the US but this positive relationship is conditional on homeownership. The interpretation of these findings is that real estate purchases represent the single most important reason for households to take on debt and even if households take on debt for other reasons, real estate collateral is often a binding requirement to be granted a loan. The thesis contributes to the existing literature in three ways. First, it is the first attempt to investigate the inequality as well as the asset mechanism in a unified framework whereas previous studies analysed them in isolation. Second, by constructing a borrowing measure from SCF data the unmatched coverage of the top tail of the wealth distribution of this dataset can be exploited. Third, the thesis provides some methodological insights when using survey data to analyse household borrowing behaviour: increased model fit by the separation of borrowing and non-borrowing households; necessity to separately control for asset purchases; disadvantages of growth rates and logarithmic differences.

Societies in the world have been struggling to redefine ways to general prosperity, although a general interest in a more human world order is constant. At the same time, cooperatives operate as privately owned for-profit enterprises having social purpose as their primary objective. The aim of this research is to investigate the potential of achieving sustainable development in enterprises operating under the cooperative principles to bring about human development and environmental improvement. The paradigm suggests interactions among environmental performance, economic results, social benefits and the ethical cooperative principles. Information on more than 1,500 coops was gathered in the EU countries of Croatia and Slovenia, and in one non-EU country Bosnia-Herzegovina and a survey was carried out among coops that were commercially active over a 12-year period from 2002-2013. After deploying the survey via email and through structured telephone interviews, statistical analysis was completed on randomly chosen 100 coops. The results support the main research hypotheses. First, the union of environmental performance and cooperative principles (EP&CP) confirm the existence of a relationship with the economic results. Secondly, the combination of environmental performance and cooperative principles (EP&CP) also indicate a relationship with social benefits. Above all, it is concluded that better results in economic and social benefits are gained in the group having positive Environmental Performance and Cooperative Principles (positive EP&CP) compared to the group where positive only EP was observed. This generally indicates the important contribution of Cooperative Principles to Sustainable Development. Using the survey data an innovative Cooperative Sustainability Index (CSI) has been produced as composite indicator measuring the success in applying ethical elements within two dimensions: the cooperative principles dimension and the environmental. Slovenia has the highest ranking score; Croatia shows less success at the second position; Bosnia Herzegovina has the weakest results. Sustainable development conditions across the Eastern Adriatic region demonstrate an interesting diversity in the environmental sustainability results among the states, but to a certain extent there are similarities as far as social and economic conditions are concerned. Paradoxically, socialism damaged social enterprises like coops in the post-WWII period in the Eastern Adriatic. This occurred not only because the socialist governments misinterpreted cooperative principles, but above all because democratic organisations like coops in a non-democratic society challenge the ethical orthodoxy. In the last few decades, the recovery of coops has varied according to their geographical location. As demonstrated, coops mostly positively prevent contemporary environmental degradation of the world’s resources but also positively contribute to economic and social issues; this puts them in an important position to reduce the inequalities produced by contemporary authoritarian capitalism across the world. In this sense, the first Cooperative Sustainability Index will find its future application and usefulness.