Private Banking Credit and Economic Growth in Mexico: A State Level Panel Data Analysis 2005-2018

Torre Cepeda Leonardo E. and Flores Segovia Miguel A.

No 2020-17, Working Papers from Banco de México

Abstract: The paper investigates the effect of banking credit to private agriculture, industrial and services sectors, on per capita GDP growth in Mexico using panel data at the state level for the period 2005-2018. The estimation controls for variables related to infrastructure, public expenditure, exports, inflation, human capital, a dummy for the 2008-2009 global financial crisis, and introduces a lag of the dependent variable in order to consider its likely persistence. Using the Generalized Method of Moments in order to control for possible endogenous effects among the variables, it is estimated that a 10%increase in the ratio of banking credit to GDP increases per capita GDP growth at the state level between 0.61 and 0.81 percentage points. These results underline the relevance of policy measures designed to promote a healthy functioning of the financial system in Mexico.

Keywords: Banking Credit; Economic Growth; Regional Analysis; Mexico (search for similar items in EconPapers)
JEL-codes: G21 O47 R11 R15 (search for similar items in EconPapers)
Date: 2020-12
New Economics Papers: this item is included in nep-ban and nep-fdg
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