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Bank Credit Allocation and Sectorial Concentration in Mexico: Some Empirical Evidence

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  • Ramos Francia Manuel
  • García-Verdú Santiago

Abstract

We empirically assess the extent to which relative growth rates in labor productivity, output, and wage, and growth in a proxy of firms' concentration can explain relative bank credit growth at a sectorial level in the Mexican economy. To that end, we divide our sectors into two groups based on their average concentration. Then, we estimate a panel regression with fixed effects for each group, positing relative credit growth as dependent variable. We document that changes in concentration growth contribute to explaining relative credit growth, particularly so in the group with high average concentration. However, in the group with low average concentration, relative credit growth seems to be also explained by relative labor productivity, output, and wage growth rates. We also discuss some mechanisms that might explain these results. Such mechanisms could lead to counterproductive dynamics between concentration growth and relative credit growth, for which we provide some empirical evidence.

Suggested Citation

  • Ramos Francia Manuel & García-Verdú Santiago, 2017. "Bank Credit Allocation and Sectorial Concentration in Mexico: Some Empirical Evidence," Working Papers 2017-14, Banco de México.
    • Handle: RePEc:bdm:wpaper:2017-14
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    References listed on IDEAS

    as
    1. Arias-Vazquez, Francisco Javier & Azuara, Oliver & Bernal, Pedro & Heckman, James J. & Villarreal, Cajeme, 2010. "Policies to Promote Growth and Economic Efficiency in Mexico," IZA Discussion Papers 4740, Institute of Labor Economics (IZA).
    2. Rodrigo Barros, 2008. "Wealthier But Not Much Healthier: Effects of a Health Insurance Program for the Poor in Mexico," Discussion Papers 09-002, Stanford Institute for Economic Policy Research.
    3. Stijn Claessens, 2009. "Competition in the Financial Sector: Overview of Competition Policies," The World Bank Research Observer, World Bank, vol. 24(1), pages 83-118, April.
    4. Michael R.M. Abrigo & Inessa Love, 2016. "Estimation of Panel Vector Autoregression in Stata: a Package of Programs," Working Papers 201602, University of Hawaii at Manoa, Department of Economics.
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    More about this item

    Keywords

    Credit; Concentration; Productivity; Mexico;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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