Relaxing Credit Constraints in Emerging Economies: The Impact of Public Loans on the Performance of Brazilian Manufacturers

30 Pages Posted: 5 Jul 2014

See all articles by Gianmarco I.P. Ottaviano

Gianmarco I.P. Ottaviano

Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation

Filipe Lage de Sousa

Universidade Federal Fluminense; IADB

Multiple version iconThere are 2 versions of this paper

Date Written: June 2014

Abstract

Especially in developing countries credit constraints are often perceived as one of the most important market frictions constraining firm innovation and growth. Huge amounts of public money are being devoted to the removal of such constraints but their effectiveness is still subject to an intense policy debate. This paper contributes to this debate by analysing the effects of the Brazilian Development Bank (BNDES) loans. It finds that, before receiving BNDES support, granted firms are indeed more credit constrained than comparable non-granted firms. It also finds that BNDES support allows granted firms to achieve the same level of performance as similar non-granted firms that are not credit constrained. However, it does not allow granted firms to outperform similar non-granted ones.

Keywords: heterogeneous firms, productivity, public policy analysis, credit constraints

JEL Classification: O38, H00

Suggested Citation

Ottaviano, Gianmarco I.P. and Lage de Sousa, Filipe, Relaxing Credit Constraints in Emerging Economies: The Impact of Public Loans on the Performance of Brazilian Manufacturers (June 2014). Centro Studi Luca d'Agliano Development Studies Working Paper No. 369. Available at SSRN: https://ssrn.com/abstract=2462195 or http://dx.doi.org/10.2139/ssrn.2462195

Gianmarco I.P. Ottaviano

Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation ( email )

Via Gobbi 5
Milan, 20136
Italy

Filipe Lage de Sousa (Contact Author)

Universidade Federal Fluminense ( email )

Rua Miguel de Frias, 9
Icaraí
Niteroi, Rio DeJaneiro 24220-900
Brazil

IADB ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

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