Informality and Bank Credit: Evidence from Firm-Level Data

39 Pages Posted: 1 Jul 2008

See all articles by Junko Koeda

Junko Koeda

Waseda University - School of Political Science and Economics

Era Dabla-Norris

International Monetary Fund (IMF)

Date Written: April 2008

Abstract

The paper relies on a firm-level data on transition economies to examine the relationship between informality and bank credit. We find evidence that informality is robustly and significantly associated with lower access to and use of bank credit. We also find that higher tax compliance costs reduce firms' reliance on bank credit, while a stronger quality of the legal environment is associated with higher access to credit even for financially opaque informal firms. An interactive term between a country-wide measure of tax compliance costs and the level of informal activity is negative and significant, suggesting that the negative association between informality and bank credit is stronger in countries with weak tax administration.

Keywords: Working Paper

Suggested Citation

Koeda, Junko and Dabla-Norris, Era, Informality and Bank Credit: Evidence from Firm-Level Data (April 2008). IMF Working Paper No. 08/94, Available at SSRN: https://ssrn.com/abstract=1153758

Junko Koeda (Contact Author)

Waseda University - School of Political Science and Economics ( email )

1-6-1 Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050, Tokyo 169-8050
Japan

Era Dabla-Norris

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
174
Abstract Views
924
Rank
274,534
PlumX Metrics