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The Importance of an Effective Legal System for Credit Markets: The Case of Argentina

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  • Andrew Powell
  • Marcela Cristini
  • Ramiro Moya

Abstract

Argentina is a federal country and hence, although laws are national and the central bank has national jurisdiction as a regulator of the financial system, the 24 Argentine provinces have independent judicial authority. In this paper we analyze how variations in the effectiveness of the legal system across the different provinces have affected the development of credit markets. We find strong results. Provinces with poor legal enforcement have less credit available to borrowers and banks’ non-performing loans are higher. We conclude that the effectiveness of the legal system remains a highly significant variable in determining the development of the Argentine credit market and that improvements in the legal system would result in a significant increase in the availability of credit.

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Bibliographic Info

Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 3125.

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Date of creation: Feb 2001
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Handle: RePEc:idb:wpaper:3125

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References

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  1. Gustavo Enrique Cañonero, 1997. "Bank Concentration and the Supply of Credit in Argentina," IMF Working Papers 97/40, International Monetary Fund.
  2. Sherwood, Robert M. & Shepherd, Geoffrey & De Souza, Celso Marcos, 1994. "Judicial systems and economic performance," The Quarterly Review of Economics and Finance, Elsevier, vol. 34(Supplemen), pages 101-116.
  3. Luis Catão, 1997. "Bank Credit in Argentina in the Aftermath of the Mexican Crisis: Supply or Demand Constrained?," IMF Working Papers 97/32, International Monetary Fund.
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Citations

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Cited by:
  1. Chemin, Matthieu, 2009. "Do judiciaries matter for development? Evidence from India," Journal of Comparative Economics, Elsevier, vol. 37(2), pages 230-250, June.
  2. Agarwal, Sumit & Chomsisengphet, Souphala & Hassler, Olivier, 2005. "The impact of the 2001 financial crisis and the economic policy responses on the Argentine mortgage market," Journal of Housing Economics, Elsevier, vol. 14(3), pages 242-270, September.
  3. Galarza, Francisco, 2003. "El crédito solidario, el colateral social, y la colusión. Algunos apuntes
    [Group Lending, Social Collateral and Collusion. Some Notes]
    ," MPRA Paper 30442, University Library of Munich, Germany.
  4. Hainz, Christa, 2009. "Creditor passivity: The effects of bank competition and institutions on the strategic use of bankruptcy filings," Journal of Comparative Economics, Elsevier, vol. 37(4), pages 582-596, December.
  5. Magda Bianco & Tullio Jappelli & Marco Pagano, 2001. "Courts and Banks: Effects of Judicial Enforcement on Credit Markets," CSEF Working Papers 58, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 09 Apr 2002.
  6. Safavian, Mehnaz & Sharma, Siddharth, 2007. "When do creditor rights work?," Journal of Comparative Economics, Elsevier, vol. 35(3), pages 484-508, September.
  7. Laeven, Luc & Majnoni, Giovanni, 2003. "Does judicial efficiency lower the cost of credit:," Policy Research Working Paper Series 3159, The World Bank.
  8. Daniela FABBRI & Mario PADULA, 2003. "Does Poor Legal Enforcement Make Households Credit-Constrained?," FAME Research Paper Series rp81, International Center for Financial Asset Management and Engineering.
  9. Daniela Fabbri, 2001. "The Legal Enforcement of Credit Contracts and the Level of Investment," CSEF Working Papers 57, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  10. Stephane Straub, 2004. "Informal Sector: The Credit Market Channel," ESE Discussion Papers 101, Edinburgh School of Economics, University of Edinburgh.
  11. Matthieu Chemin, 2007. "Does Judicial Quality Shape Economic Activity? Evidence from a Judicial Reform in India," Cahiers de recherche 0725, CIRPEE.
  12. Matthieu Chemin, 2007. "Decoding the Code of Civil Procedure: Do Judiciaries Matter for Growth?," Cahiers de recherche 0726, CIRPEE.
  13. Safavian, Mehnaz & Sharma, Siddharth, 2007. "When do creditor rights work?," Policy Research Working Paper Series 4296, The World Bank.

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