Macroeconomic and Financial Consequences of the Post-Crisis Government-Driven Credit Expansion in Brazil

44 Pages Posted: 20 Mar 2015

See all articles by Marco Bonomo

Marco Bonomo

Insper Institute of Education and Research

Ricardo D. Brito

FEA-USP

Bruno Martins

Government of the Federative Republic of Brazil - Central Bank of Brazil

Date Written: March 2015

Abstract

Government-driven credit played an important role in countervailing the private credit crunch in Brazil during the recent financial crisis. However, government credit concessions continued to expand after the economy recovered. This paper investigates some important features of this expansion using a huge repository of loan contracts between banks and firms, composing an unbalanced panel of almost 1 million firms between 2004 and 2012. The results show that larger, older and less risky firms have benefited most from the government-sponsored credit expansion. Additionally, although higher access to earmarked credit tends to lead to higher leverage, the effect on investment appears to be insignificant for publicly traded firms. Since interest rates on earmarked loans are lower than market interest rates, firms with higher access to this type of loan tend to lower.

Keywords: Education, Crisis management, State ownership of banks, Investment

JEL Classification: G20, H1, L3, O16

Suggested Citation

Bonomo, Marco and Brito, Ricardo Dias and Martins, Bruno, Macroeconomic and Financial Consequences of the Post-Crisis Government-Driven Credit Expansion in Brazil (March 2015). IDB Working Paper No. IDB-WP-551, Available at SSRN: https://ssrn.com/abstract=2581395 or http://dx.doi.org/10.2139/ssrn.2581395

Marco Bonomo (Contact Author)

Insper Institute of Education and Research ( email )

R Quata 300
Sao Paulo, 04542-030
Brazil

Ricardo Dias Brito

FEA-USP ( email )

Av. Prof. Luciano Gualberto 908
São Paulo SP, São Paulo 05508-900
Brazil

Bruno Martins

Government of the Federative Republic of Brazil - Central Bank of Brazil ( email )

P.O. Box 08670
SBS Quadra 3 Bloco B - Edificio-Sede
Brasilia, Distr. Federal 70074-900
Brazil

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