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Changing the climate for banking: The economic effects of credit in a climate-vulnerable area

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  • Da Mata, Daniel
  • Resende, Guilherme

Abstract

We exploit plausibly exogenous variation in credit policy to study the real effects of credit. Producers in the semiarid, Brazil's poorest and driest region, are eligible to apply for subsidized, abundant credit provided by a state-owned bank. Based on objective climate criteria, the federal government added new localities to the Brazilian semiarid. We show that the state-owned bank increased risky loans in the added localities in accordance with legislation, but we find neither a crowding-out of credit to other banks nor a rise in delinquency rates. Smaller-sized low-income producers have invested the cheaper credit to expand climate resilient livestock. We find a rise in the income of poor people, but no aggregate impacts on local production.

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  • Da Mata, Daniel & Resende, Guilherme, 2020. "Changing the climate for banking: The economic effects of credit in a climate-vulnerable area," Journal of Development Economics, Elsevier, vol. 146(C).
    • Handle: RePEc:eee:deveco:v:146:y:2020:i:c:s0304387820300341
    DOI: 10.1016/j.jdeveco.2020.102459
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    Cited by:

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    2. Da Mata, Daniel & Emanuel, Lucas & Pereira, Vitor & Sampaio, Breno, 2023. "Climate adaptation policies and infant health: Evidence from a water policy in Brazil," Journal of Public Economics, Elsevier, vol. 220(C).
    3. Luís Carazza & Raul da Mota Silveira Neto & Lucas Emanuel, 2021. "Juvenile curfew and crime reduction: Evidence from Brazil," Papers in Regional Science, Wiley Blackwell, vol. 100(2), pages 561-579, April.

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    More about this item

    Keywords

    Banking; Government ownership; Growth; Climate; Place-based policies;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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