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Bank ownership, lending, and local economic performance during the 2008–2009 financial crisis

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  • Coleman, Nicholas
  • Feler, Leo

Abstract

Although government banks are frequently associated with political capture and resource misallocation, they may be well-positioned during times of crisis to provide counter-cyclical support. Following the collapse of Lehman Brothers in September 2008, Brazil׳s government banks substantially increased lending. Localities in Brazil with a high share of government banks received more loans and experienced better employment outcomes relative to localities with a low share of government banks. While increased government bank lending mitigated an economic downturn, we find that this lending was politically targeted, inefficiently allocated, and reduced productivity growth.

Suggested Citation

  • Coleman, Nicholas & Feler, Leo, 2015. "Bank ownership, lending, and local economic performance during the 2008–2009 financial crisis," Journal of Monetary Economics, Elsevier, vol. 71(C), pages 50-66.
    • Handle: RePEc:eee:moneco:v:71:y:2015:i:c:p:50-66
    DOI: 10.1016/j.jmoneco.2014.11.001
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