From Pawn Shops to Banks: The Impact of Banco Azteca on Households' Credit and Saving Decisions

Claudia Ruiz
Additional contact information
Claudia Ruiz: UCLA

No 969, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: This research examines the effects of relaxing credit constraints on households' saving and credit choices. I focus in the opening of a new bank in Mexico that targeted workers of the informal sector that were previously denied access to bank credit. I first explore the difference-in-difference effects of the appearance of this bank. Important changes are found in households from municipalities with branches of this new bank, whose members are employed in the informal sector. First, they are three times more likely to use bank credit. They are also 46% less prone to obtain pawn-shop credit. I also find some evidence that they are 15% less likely to keep precautionary savings, and they increase their percapita consumption by 46% when faced with a bad income shock. I then develop and estimate a dynamic structural model that I use to evaluate the effects of setting a ceiling on the interest rate this new bank charges, which is a very popular regulation suggested by several policy makers in Mexico. The model predicts that capping the interest rate would make the bank close its branches in some municipalities that now have a branch, resulting in a general loss of households' welfare.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://red-files-public.s3.amazonaws.com/meetpapers/2010/paper_969.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:sed010:969

Access Statistics for this paper

More papers in 2010 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().