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The effects of taxing bank transactions on bank credit and industrial growth: Evidence from Latin America

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  • Restrepo, Felipe

Abstract

This paper studies the bank credit and industry growth effects stemming from the introduction of a tax on bank debits. Using a sample of Latin American countries that implemented this tax at different times between 1986 and 2005, I exploit a key channel through which this levy affects the supply of credit: it creates a strong incentive to shift away from holding deposits and into using cash and other quasi-currencies. I find that taxing bank transactions has a significant negative effect on economic growth, mainly by reducing the growth prospects of industries that are more susceptible to financing frictions.

Suggested Citation

  • Restrepo, Felipe, 2019. "The effects of taxing bank transactions on bank credit and industrial growth: Evidence from Latin America," Journal of International Money and Finance, Elsevier, vol. 93(C), pages 335-355.
    • Handle: RePEc:eee:jimfin:v:93:y:2019:i:c:p:335-355
    DOI: 10.1016/j.jimonfin.2019.02.005
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    2. Ana Lilia Hernández Pineda & Alí Aali-Bujari, 2022. "¿Impulsan la actividad económica en América Latina el número de sucursales bancarias y cajeros automáticos?," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 17(1), pages 1-13, Enero - M.
    3. Brugués, Felipe & De Simone, Rebeca, 2024. "Taxation when Markets are not Competitive: Evidence from a Loan Tax," IDB Publications (Working Papers) 13409, Inter-American Development Bank.
    4. Rubén Chavarín Rodríguez & Aurea Tlatoa Chávez, 2023. "La importancia del crédito bancario para la actividad económica en México: un análisis del sector manufacturero," Ensayos Revista de Economía, Universidad Autónoma de Nuevo León, vol. 42(1), pages 83-120, January.

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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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