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Determinants of Credit Expansion in Brazil

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  • Barbi, Fernando C.

Abstract

Brazilian economy has experienced a major boost in leverage in the first decade of 2000 as a result of a set factors ranging from macroeconomic stability to the abundant liquidity in international financial markets before 2008 and a set of deliberate decisions taken by President Lula's to expand credit, boost consumption and gain political support from the lower social strata. This paper analyzes the determinants of credit using an extensive bank level panel dataset. As relevant conclusions to our investigation we verify that: credit expansion relied on the reduction of the monetary policy rate, international financial markets are an important source of funds, payroll-guaranteed credit and investment grade status affected positively credit supply. We were not able to confirm the importance of financial inclusion efforts. The importance of financial sector sanity indicators of credit conditions cannot be underestimated. These results raise questions over the sustainability of this expansion process and financial stability in the future.

Suggested Citation

  • Barbi, Fernando C., 2014. "Determinants of Credit Expansion in Brazil," MPRA Paper 19535, University Library of Munich, Germany, revised 13 Sep 2014.
  • Handle: RePEc:pra:mprapa:19535
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    File URL: https://mpra.ub.uni-muenchen.de/19535/1/MPRA_paper_19535.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    bank credit; public credit; emerging markets; financial stability;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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