Bank Ownership, Lending, and Local Economic Performance During the 2008-2010 Financial Crisis

60 Pages Posted: 10 Apr 2014

See all articles by Nicholas Coleman

Nicholas Coleman

Board of Governors of the Federal Reserve System

Leo Feler

Brown University - Department of Economics

Date Written: March 20, 2014

Abstract

While the finance literature often equates government banks with political capture and capital misallocation, these banks can help mitigate financial shocks. This paper examines the role of Brazil’s government banks in preventing a recession during the 2008-2010 financial crisis. Government banks in Brazil provided more credit, which offset declines in lending by private banks. Areas in Brazil with a high share of government banks experienced increases in lending, production, and employment during the crisis compared to areas with a low share of these banks. We find no evidence that lending was politically targeted or that it caused productivity to decline in the short-run.

Keywords: Financial Crises; State-Owned Banks; Local Economic Activity

JEL Classification: E44, E51, E65, G01, G21, H81, J23, R11, R5

Suggested Citation

Coleman, Nicholas and Feler, Leo, Bank Ownership, Lending, and Local Economic Performance During the 2008-2010 Financial Crisis (March 20, 2014). FRB International Finance Discussion Paper No. 1099, Available at SSRN: https://ssrn.com/abstract=2423040 or http://dx.doi.org/10.2139/ssrn.2423040

Nicholas Coleman (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Leo Feler

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

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