Macroeconomic Effects of Credit Deepening in Latin America

Carlos Carvalho, Nilda Pasca, Laura Souza and Eduardo Zilberman
Authors registered in the RePEc Author Service: Carlos G. Scartascini, Mariano Tommasi and Ernesto Stein

No 6787, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: This paper augments a relatively standard dynamic general equilibrium model with financial frictions in order to quantify the macroeconomic effects of the credit deepening process observed in many Latin American (LA) countries in the last decade, most notably in Brazil. In the model, a stylized banking sector intermediates credit from patient households to impatient households and firms. The key novelty of the paper, motivated by the Brazilian experience, is to model the credit constraint faced by (impatient) households as a function of future labor income. In the calibrated model, credit deepening generates only modest abovetrend growth in consumption, investment, and GDP. Since Brazil has experienced one of the most intense credit deepening processes in Latin America, it is argued that the quantitative effects for other LA economies are unlikely to be sizeable.

Keywords: Payroll lending; Credit deepening; Consignado credit; Financial frictions (search for similar items in EconPapers)
JEL-codes: E20 E44 E51 (search for similar items in EconPapers)
Date: 2015-01
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Macroeconomic Effects of Credit Deepening in Latin America (2023)
Working Paper: Macroeconomic Effects of Credit Deepening in Latin America (2019)
Working Paper: Macroeconomic Effects of Credit Deepening in Latin America (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:6787

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