Claessens, Stijn and Luc Laeven. 2005. “Financial Dependence, Banking Sector Competition, and Economic Growth,” Journal of the European Economic Association, 3(1), pages 179–207.
Prepared by Frederic Lambert and Diva Singh (WHD).
In December 2014, Scotiabank signed an agreement to buy Discount Bank Latin America (owned by Israel’s Discount Bank), Uruguay’s ninth largest bank, for US$65 million. The deal is expected to be completed in 2015.
Payroll loans are uncollateralized loans whose installments are directly debited from workers’ pay.
From a scale of 0 to 1, 1 being a perfect monopoly.
Kaufmann, Kraay, and Mastruzzi (2004), included in the World Bank Worldwide Governance Indicators.
Jimenez, Lopez and Saurina (2013), Fisman and Raturi (2004).
The analysis uses changes in loan stocks or net transaction flows as a proxy for new loans, although repayments of previously granted loans should not in theory be deducted from new loans. A detailed description of the model can be found in Chapter 2 of the October 2013 Global Financial Stability Report.
Other endogeneity issues complicate the proper identification of the model. Most variables in the analysis are at some level more or less jointly determined. For instance, changes in business confidence may be affected by current changes in bank lending standards and credit provision. Similarly, changes in the ratio of non-performing loans will depend on the volume of new loans during the period. To alleviate the resulting endogeneity, some of the regressors are lagged by one period.
Among the other possible shifters is the yield on U.S. Treasury securities, as banks can arbitrage between domestic lending in dollar and investment of the collected dollar deposits in dollar-denominated securities abroad. The results were not significant.
The slopes of both curves are assumed to have remained the same between 2006 and 2015 (i.e., the elasticity of supply and demand to interest rates has not changed over time).