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Institutions and credit

Author

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  • Farla, Kristine

    (UNU-MERIT / MGSOG, Maastricht University)

Abstract

It is well-known that the extent of credit lent to private agents differs widely between countries. The `financial deepening' of the economy offers opportunities as well as financial risks. This study investigates the extent to which institutional characteristics are re- lated to countries' level of credit depth. The findings suggest that the formalization of property rights, contracting, and competition institutions is positively related to an increase in the level of credit to the private sector. This result remains robust when controlling for the effect of financial policy. The effect of institutional characteristics on banks' lending capacity and investment is mixed. However, overall, institutional formalization has a positive impact on credit deepening and investment.

Suggested Citation

  • Farla, Kristine, 2012. "Institutions and credit," MERIT Working Papers 2012-038, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    • Handle: RePEc:unm:unumer:2012038
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    File URL: https://www.merit.unu.edu/publications/wppdf/2012/wp2012-038.pdf
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    Cited by:

    1. Jelena Zvezdanović Lobanova & Davorin Kračun & Alenka Kavkler, 2018. "Institutions as a Mediator of the Effect of Crossborder Mergers & Acquisitions on Domestic Investment," Prague Economic Papers, Prague University of Economics and Business, vol. 2018(4), pages 479-493.
    2. repec:prg:jnlpep:v:preprint:id:665:p:1-15 is not listed on IDEAS

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    More about this item

    Keywords

    Institutions; Financial Development; Property Rights; Contract; Competition;
    All these keywords.

    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
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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