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Does judicial efficiency lower the cost of credit:

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  • Laeven, Luc
  • Majnoni, Giovanni

Abstract

The authors investigate the effect of judicial efficiency on banks'lending spreads for a large cross section of countries. They measure bank interest rate spreads for 106 countries at an aggregate level, and for 32 countries at the level of individual banks. The authors find that-after controlling for a number of other country characteristics-judicial efficiency, in addition to inflation, is the main driver of interest rate spreads across countries. This suggests that in addition to improving the overall macroeconomic climate in a country, judicial reforms, through a better enforcement of legal contracts, are critical to lowering the cost of financial intermediation for households and firms.

Suggested Citation

  • Laeven, Luc & Majnoni, Giovanni, 2003. "Does judicial efficiency lower the cost of credit:," Policy Research Working Paper Series 3159, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3159
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    References listed on IDEAS

    as
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