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The Importance of an Effective Legal System for Credit Markets: The Case of Argentina

  • Andrew Powell
  • Marcela Cristini
  • Ramiro Moya

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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Paper provided by Inter-American Development Bank, Research Department in its series Research Department Publications with number 3125.

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Date of creation: Feb 2001
Date of revision:
Handle: RePEc:idb:wpaper:3125
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  1. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
  2. 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.
  3. Luis Catão, 1997. "Bank Credit in Argentina in the Aftermath of the Mexican Crisis: Supply or Demand Constrained?," IMF Working Papers 97/32, International Monetary Fund.
  4. Gustavo Enrique Cañonero, 1997. "Bank Concentration and the Supply of Credit in Argentina," IMF Working Papers 97/40, International Monetary Fund.
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