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Credit Stabilization Through Public Banks: The Case of Banco Estado

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  • Luis Felipe Lagos
  • Matías Tapia

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.

Suggested Citation

  • Luis Felipe Lagos & Matías Tapia, 2014. "Credit Stabilization Through Public Banks: The Case of Banco Estado," Working Papers Central Bank of Chile 740, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:740
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    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_740.pdf
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    References listed on IDEAS

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    1. Miguel Fuentes D. & Diego Saravia, 2014. "Tales of Two Recessions in Chile: Financial Frictions in 1999 and 2009," Central Banking, Analysis, and Economic Policies Book Series, in: Miguel Fuentes D. & Claudio E. Raddatz & Carmen M. Reinhart (ed.),Capital Mobility and Monetary Policy, edition 1, volume 18, chapter 5, pages 137-163, Central Bank of Chile.
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    Cited by:

    1. Miguel Biron & Felipe Córdova & Antonio Lemus, 2019. "Banks' business model and credit supply in Chile: the role of a state-owned bank," BIS Working Papers 800, Bank for International Settlements.
    2. Cordero, Alvaro & Villena, Mauricio, 2020. "Política y Sostentabilidad Fiscal en tiempos de Covid-19: El Caso de Chile [Fiscal Policy in Covid-19 Times: The Case of Chile]," MPRA Paper 100791, University Library of Munich, Germany, revised 20 May 2020.
    3. Patricio Toro, 2019. "The Persistent Effect of a Credit Crunch on Output and Productivity: Technical or Allocative Efficiency?," Working Papers Central Bank of Chile 837, Central Bank of Chile.
    4. Biron Miguel & Felipe Córdova & Antonio Lemus, 2019. "Banks’ Business Model and Credit Supply in Chile: The Role of a State-Owned Bank," Working Papers hal-04141896, HAL.

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