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Bank ownership, lending, and local economic performance during the 2008–2009 financial crisis

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  • Coleman, Nicholas
  • Feler, Leo

Abstract

Although government banks are frequently associated with political capture and resource misallocation, they may be well-positioned during times of crisis to provide counter-cyclical support. Following the collapse of Lehman Brothers in September 2008, Brazil׳s government banks substantially increased lending. Localities in Brazil with a high share of government banks received more loans and experienced better employment outcomes relative to localities with a low share of government banks. While increased government bank lending mitigated an economic downturn, we find that this lending was politically targeted, inefficiently allocated, and reduced productivity growth.

Suggested Citation

  • Coleman, Nicholas & Feler, Leo, 2015. "Bank ownership, lending, and local economic performance during the 2008–2009 financial crisis," Journal of Monetary Economics, Elsevier, vol. 71(C), pages 50-66.
  • Handle: RePEc:eee:moneco:v:71:y:2015:i:c:p:50-66
    DOI: 10.1016/j.jmoneco.2014.11.001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. repec:eee:ecosys:v:41:y:2017:i:2:p:305-319 is not listed on IDEAS
    2. Noth, Felix & Ossandon Busch, Matias, 2017. "Banking globalization, local lending, and labor market effects: Micro-level evidence from Brazil," IWH Discussion Papers 7/2017, Halle Institute for Economic Research (IWH).
    3. OGURA Yoshiaki, 2016. "The Objective Function of Government-controlled Banks in a Financial Crisis," Discussion papers 16004, Research Institute of Economy, Trade and Industry (RIETI).
    4. João Barata R B Barroso & Rodrigo Barbone Gonzalez & Bernardus F Nazar Van Doornik, 2017. "Credit supply responses to reserve requirement: loan-level evidence from macroprudential policy," BIS Working Papers 674, Bank for International Settlements.
    5. repec:eee:jbfina:v:89:y:2018:i:c:p:78-93 is not listed on IDEAS
    6. Ashraf, Quamrul & Gershman, Boris & Howitt, Peter, 2017. "Banks, market organization, and macroeconomic performance: An agent-based computational analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 135(C), pages 143-180.
    7. Becker, Christian & Ossandon Busch, Matias & Tonzer, Lena, 2017. "Macroprudential policy and intra-group dynamics: The effects of reserve requirements in Brazil," IWH Discussion Papers 21/2017, Halle Institute for Economic Research (IWH).
    8. Vernikov, Andrei, 2017. "Структурные Или Институциональные Сдвиги? Попытка Измерения На Примере Банковского Сектора
      [Structural change, institutional change and their measurement: The case of banking]
      ," MPRA Paper 79978, University Library of Munich, Germany.
    9. Meriläinen, Jari-Mikko, 2016. "Lending growth during the financial crisis and the sovereign debt crisis: The role of bank ownership type," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 41(C), pages 168-182.
    10. Schoors, Koen & Weill, Laurent, 2017. "Russia's 1999–2000 election cycle and the politics-banking interface," BOFIT Discussion Papers 17/2017, Bank of Finland, Institute for Economies in Transition.
    11. Nicholas Coleman & Ricardo Correa & Leo Feler & Jason Goldrosen, 2017. "Internal Liquidity Management and Local Credit Provision," International Finance Discussion Papers 1204, Board of Governors of the Federal Reserve System (U.S.).
    12. SEKINO Masahiro & WATANABE Wako, 2016. "Does the Policy Lending of a Government Financial Institution to Mitigate the Credit Crunch Improve Firm Performance? Evidence from loan level data in Japan," Discussion papers 16056, Research Institute of Economy, Trade and Industry (RIETI).
    13. Noth, Felix & Busch, Matias Ossandon, 2017. "Banking globalization, local lending, and labor market effects : Micro-level evidence from Brazil," BOFIT Discussion Papers 11/2017, Bank of Finland, Institute for Economies in Transition.
    14. Vernikov, Andrei & Mamonov, Mikhail, 2017. "Долгосрочное Банковское Кредитование: Какие Банки Им Занимаются И Почему?
      [Which banks and why lend long-term in Russia?]
      ," MPRA Paper 77160, University Library of Munich, Germany.

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