Government Banks, Household Debt, and Economic Downturns: The Case of Brazil

Gabriel Garber, Atif Mian, Jacopo Ponticelli and Amir Sufi

No 876, BIS Working Papers from Bank for International Settlements

Abstract: After the global financial crisis, government banks in Brazil boosted credit provision to households, generating a sharp increase in household debt which was followed by the most severe recession in recent Brazilian history in 2015-2016. Using a novel individual-level data set including matched credit registry and employer-employee information, we show that individuals with higher debt-to-income growth during the boom experienced lower subsequent credit card expenditure during the recession. To identify the credit-supply effect, we exploit individuals borrowing from both government-controlled and private banks. We show that, during the late stages of the boom period, government banks increased their lending more than private banks to the same individual. To study the effect of this credit supply shock on individual consumption, we exploit variation in the sector of employment of each borrower. Individuals employed by the public sector were disproportionately targeted by payroll loans offered by government banks and experienced larger decline in credit card spending during the subsequent recession.

Keywords: credit booms; household credit; payroll loans; credit card expenditure (search for similar items in EconPapers)
JEL-codes: D14 E21 G21 G28 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2020-08
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Government Banks, Household Debt, and Economic Downturns: the case of Brazil (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:876

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