Download This PaperThe Shadow Economy and Banks’ Lending Technology
36 Pages Posted: 15 Feb 2015
Date Written: December 14, 2014
Abstract
Is there a relationship between bank monitoring models and the level of shadow economy? This paper develops a model of optimal lending technology to study the relationship between local underground economic activity and banks’ lending choices. In turn, as the aggregate level of informality and tax evasion increase, it becomes more profitable for banks to screen and supervise borrowers using more costly in-depth monitoring technologies. A large dataset of regional Italian data confirms these conjectures.
Keywords: shadow economy, monitoring
JEL Classification: G21, K420
Suggested Citation: Suggested Citation
Capasso, Salvatore and Monferra', Stefano and Sampagnaro, Gabriele, The Shadow Economy and Banks’ Lending Technology (December 14, 2014). Available at SSRN: https://ssrn.com/abstract=2564888 or http://dx.doi.org/10.2139/ssrn.2564888
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