The effects of taxing bank transactions on bank credit and industrial growth: Evidence from Latin America

Felipe Restrepo

Journal of International Money and Finance, 2019, vol. 93, issue C, 335-355

Abstract: This paper studies the bank credit and industry growth effects stemming from the introduction of a tax on bank debits. Using a sample of Latin American countries that implemented this tax at different times between 1986 and 2005, I exploit a key channel through which this levy affects the supply of credit: it creates a strong incentive to shift away from holding deposits and into using cash and other quasi-currencies. I find that taxing bank transactions has a significant negative effect on economic growth, mainly by reducing the growth prospects of industries that are more susceptible to financing frictions.

Keywords: Bank account debit taxes; Bank transaction taxes; Bank credit; Industry growth (search for similar items in EconPapers)
JEL-codes: E44 G21 G30 H22 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:93:y:2019:i:c:p:335-355

DOI: 10.1016/j.jimonfin.2019.02.005

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