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International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page Bank Ownership, Lending, and Local Economic Performance During the 2008-2010 Financial Crisis
Nicholas Coleman and Leo Feler
2014-1099  (March 2014)

Abstract:  While the finance literature often equates government banks with political capture and capital misallocation, these banks can help mitigate financial shocks. This paper examines the role of Brazilís government banks in preventing a recession during the 2008-2010 financial crisis. Government banks in Brazil provided more credit, which offset declines in lending by private banks. Areas in Brazil with a high share of government banks experienced increases in lending, production, and employment during the crisis compared to areas with a low share of these banks. We find no evidence that lending was politically targeted or that it caused productivity to decline in the short-run.

Full paper (981 KB PDF)

Keywords
Credit, financial crises, state-owned banks, local economic activity

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Last update: March 31, 2014