The Importance of an Effective Legal System for Credit Markets: The Case of Argentina
Argentina is a federal country and hence, although laws are national and the central bank has national jurisdiction as a regulator of the financial system, the 24 Argentine provinces have independent judicial authority. In this paper we analyze how variations in the effectiveness of the legal system across the different provinces have affected the development of credit markets. We find strong results. Provinces with poor legal enforcement have less credit available to borrowers and banks’ non-performing loans are higher. We conclude that the effectiveness of the legal system remains a highly significant variable in determining the development of the Argentine credit market and that improvements in the legal system would result in a significant increase in the availability of credit.
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- Gustavo Enrique CaÃ±onero, 1997. "Bank Concentration and the Supply of Credit in Argentina," IMF Working Papers 97/40, International Monetary Fund.
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- La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
- Luis CatÃ£o, 1997. "Bank Credit in Argentina in the Aftermath of the Mexican Crisis; Supply or Demand Constrained?," IMF Working Papers 97/32, International Monetary Fund.
- Sherwood, Robert M. & Shepherd, Geoffrey & De Souza, Celso Marcos, 1994. "Judicial systems and economic performance," The Quarterly Review of Economics and Finance, Elsevier, vol. 34(Supplemen), pages 101-116.
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