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Credit Stabilization through Public Banks: The Case of BancoEstado

In: Macroeconomic and Financial Stability: challenges for Monetary Policy

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  • Luis Felipe Lagos

    (Instituto Libertad y Desarrollo, Chile)

  • Matías Tapia

    (Pontificia Universidad Católica de Chile)

Abstract

This paper analyzes the role played by BancoEstado in providing credit during the 2008-2009 financial crisis. An analysis of the data shows that BancoEstado increased its credit significantly, particularly in terms of loans to firms, increasing its market share and remaning profitable. A large share of BancoEstado’s credit expansion was directed to large firms. While this was probably efficient in terms of maximizing the bank’s long-term value, it might have been at odds with the ultimate objective of stabilizing the credit contraction for firms facing liquidity constraints. We find no evidence of BancoEstado’s credit expansion on the credit decisions of private banks.
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Suggested Citation

  • Luis Felipe Lagos & Matías Tapia, 2014. "Credit Stabilization through Public Banks: The Case of BancoEstado," Central Banking, Analysis, and Economic Policies Book Series, in: Sofía Bauducco & Lawrence Christiano & Claudio Raddatz (ed.),Macroeconomic and Financial Stability: challenges for Monetary Policy, edition 1, volume 19, chapter 14, pages 461-499, Central Bank of Chile.
  • Handle: RePEc:chb:bcchsb:v19c14pp461-499
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