Institutions and credit

Kristine Farla

No 2012-038, MERIT Working Papers from United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT)

Abstract: It is well-known that the extent of credit lent to private agents differs widely between countries. The `financial deepening' of the economy offers opportunities as well as financial risks. This study investigates the extent to which institutional characteristics are re- lated to countries' level of credit depth. The findings suggest that the formalization of property rights, contracting, and competition institutions is positively related to an increase in the level of credit to the private sector. This result remains robust when controlling for the effect of financial policy. The effect of institutional characteristics on banks' lending capacity and investment is mixed. However, overall, institutional formalization has a positive impact on credit deepening and investment.

Keywords: Institutions; Financial Development; Property Rights; Contract; Competition (search for similar items in EconPapers)
JEL-codes: E44 G18 O11 O43 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:unm:unumer:2012038

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