Courts and Banks: Effects of Judicial Enforcement on Credit Markets

Magda Bianco (), Tullio Jappelli () and Marco Pagano
Additional contact information
Magda Bianco: Banca d'Italia

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: The costs of enforcing contracts is a key determinant of market performance. We document this point with reference to the credit market. We start by presenting a model of opportunistic debtors and inefficient courts. According to the model, improvements in judicial efficiency reduce credit rationing and increase lending, while have an ambiguous effect on interest rates, depending on banking competition and on the type of judicial reform. These predictions are supported by panel data on Italian provinces and by cross-country evidence. In Italian provinces with longer trials or large backlogs of pending trials, credit is less widely available than elsewhere. International evidence also shows that the depth of mortgage markets is inversely related to costs of mortgage foreclosure and other proxies for judicial inefficiency.

Keywords: enforcement; judicial efficiency; credit market; lending; interest rates (search for similar items in EconPapers)
JEL-codes: G2 K4 (search for similar items in EconPapers)
Date: 2001-06-01, Revised 2002-04-09
New Economics Papers: this item is included in nep-law, nep-mfd and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (59)

Published in The Journal of Money, Credit, and Banking, April 2005, vol. 37, issue 2, pages 223-244

Downloads: (external link)
http://www.csef.it/WP/wp58.pdf (application/pdf)

Related works:
Journal Article: Courts and Banks: Effects of Judicial Enforcement on Credit Markets (2005)
Working Paper: Courts and Banks: Effects of Judicial Enforcement on Credit Markets (2002)
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:sef:csefwp:58

Access Statistics for this paper

More papers in CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy Contact information at EDIRC.
Bibliographic data for series maintained by Dr. Maria Carannante ().