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Who gets the credit ? and does it matter ? household vs. firm lending across countries

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  • Beck, Thorsten
  • Buyukkarabacak, Berrak
  • Rioja, Felix
  • Valev, Neven

Abstract

While the theoretical and empirical finance literature has focused almost exclusively on enterprise credit, about half of credit extended by banks to the private sector in a sample of 45 developing and developed countries is to households. The share of household credit in total credit increases as countries grow richer and financial systems develop. Cross-country regressions, however, suggest a positive and significant impact on gross domestic product per capita growth only of enterprise but not household credit. These two findings together partly explain why previous studies have found a small or insignificant effect of finance on growth in high-income countries. In addition, countries with a lower share of manufacturing, a higher degree of urbanization, and more market-oriented financial systems have a higher share of household credit. It is thus mostly socio-economic trends that determine credit composition, while policies influencing banking market structure and regulatory policies are not robustly related to credit composition.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4661.

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Date of creation: 01 Jul 2008
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Handle: RePEc:wbk:wbrwps:4661

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Keywords: Access to Finance; Banks&Banking Reform; Economic Theory&Research; Debt Markets;

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Cited by:
  1. Thorsten Beck & Andrea Colciago & Damjan Pfajfar, 2014. "The role of financial intermediaries in monetary policy transmission," DNB Working Papers, Netherlands Central Bank, Research Department 420, Netherlands Central Bank, Research Department.
  2. Bateman, Milford, 2013. "The age of microfinance: Destroying Latin American economies from the bottom up," Working Papers, Österreichische Forschungsstiftung für Internationale Entwicklung (ÖFSE) / Austrian Foundation for Development Research 39, Österreichische Forschungsstiftung für Internationale Entwicklung (ÖFSE) / Austrian Foundation for Development Research.
  3. Stefano Pagliari & Clive Briault & Alistair Milne & Patricia Jackson & Vicky Pryce & David T. Llewellyn & David Lascelles & Thorsten Beck, 2012. "Future Risks and Fragilities for Financial Stability," SUERF Studies, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum, number 2012/3 edited by David T. Llewellyn & Richard Reid, July.
  4. Bhattacharyya, Sambit & Hodler, Roland, 2014. "Do Natural Resource Revenues Hinder Financial Development? The Role of Political Institutions," World Development, Elsevier, Elsevier, vol. 57(C), pages 101-113.
  5. Cécile Bastidon, 2014. "Households credits and financial stability," Post-Print, HAL hal-01021280, HAL.
  6. Jappelli Tullio & Pagano Marco & Di Maggio Marco, 2013. "Households' indebtedness and financial fragility," Journal of Financial Management, Markets and Institutions, Società editrice il Mulino, Società editrice il Mulino, issue 1, pages 26-35, January.
  7. Gunther Capelle-Blancard & Claire Labonne, 2011. "More Bankers, More Growth? Evidence from OECD Countries," Working Papers, CEPII research center 2011-22, CEPII research center.
  8. Enrico Berkes & Ugo Panizza & Jean-Louis Arcand, 2012. "Too Much Finance?," IMF Working Papers, International Monetary Fund 12/161, International Monetary Fund.
  9. Thorsten Beck, 2012. "Concluding Observations," Chapters in SUERF Studies, SUERF - The European Money and Finance Forum, SUERF - The European Money and Finance Forum.
  10. Beck, T.H.L. & Degryse, H.A. & Kneer, E.C., 2012. "Is More Finance Better? Disentangling Intermediation and Size Effects of Financial Systems," Discussion Paper, Tilburg University, Center for Economic Research 2012-060, Tilburg University, Center for Economic Research.
  11. Gründler, Klaus & Weitzel, Jan, 2013. "The financial sector and economic growth in a panel of countries," Wirtschaftswissenschaftliche Beiträge, Julius-Maximilians-Universität Würzburg, Lehrstuhl für Volkswirtschaftslehre, insbes. Wirtschaftsordnung und Sozialpolitik 123, Julius-Maximilians-Universität Würzburg, Lehrstuhl für Volkswirtschaftslehre, insbes. Wirtschaftsordnung und Sozialpolitik.
  12. Grydaki, Maria & Bezemer, Dirk, 2013. "Did Credit Decouple from Output in the Great Moderation?," MPRA Paper 47424, University Library of Munich, Germany.
  13. Thorsten Beck, 2014. "Ireland's Banking System - Looking Forward," The Economic and Social Review, Economic and Social Studies, Economic and Social Studies, vol. 45(1), pages 113-134.
  14. Brown, Martin & Hoffmann, Matthias, 2013. "Mortgage Relationships," Working Papers on Finance, University of St. Gallen, School of Finance 1310, University of St. Gallen, School of Finance.
  15. Zhang, Lu & Grydaki, Maria & Bezemer, Dirk, 2014. "Is Financial Development Bad for Growth?," Research Report, University of Groningen, Research Institute SOM (Systems, Organisations and Management) 14016-GEM, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  16. Giannetti, Caterina & Jentzsch, Nicola, 2013. "Credit reporting, financial intermediation and identification systems: International evidence," Journal of International Money and Finance, Elsevier, Elsevier, vol. 33(C), pages 60-80.

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