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The economic impact of subsidized credit on regional development: Evidence from Brazil's Northeast Constitutional Financing Fund (FNE), 2010–2022

Author

Listed:
  • Tatiane Iélia Da Silva

    (PPGERU-URCA)

  • Wellington Ribeiro Justo

    (URCA/UFPE)

Abstract

This study evaluates the economic effects of Brazil's Northeast Constitutional Financing Fund (FNE) on growth and employment in the SUDENE region from 2010 to 2022. Using a generalized propensity score (GPS) dose-response model, we find that FNE credit significantly increases GDP, GDP per capita and employment, with larger effects in less developed states. The analysis reveals non-linear impacts, with diminishing marginal returns at higher credit levels, highlighting the role of the FNE in mitigating regional disparities. These findings provide actionable insights for policymakers in credit-constrained regions.

Suggested Citation

  • Tatiane Iélia Da Silva & Wellington Ribeiro Justo, 2025. "The economic impact of subsidized credit on regional development: Evidence from Brazil's Northeast Constitutional Financing Fund (FNE), 2010–2022," Economics Bulletin, AccessEcon, vol. 45(3), pages 1389-1396.
    • Handle: RePEc:ebl:ecbull:eb-25-00157
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    References listed on IDEAS

    as
    1. Abhijit V. Banerjee & Esther Duflo, 2014. "Do Firms Want to Borrow More? Testing Credit Constraints Using a Directed Lending Program," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(2), pages 572-607.
    2. Stephen Cecchetti & Enisse Kharroubi, 2012. "Reassessing the impact of finance on growth," BIS Working Papers 381, Bank for International Settlements.
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    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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