The Effects of Taxing Bank Transactions on Bank Credit and Industrial Growth: Evidence from Latin America

48 Pages Posted: 30 Jun 2017 Last revised: 13 Feb 2019

See all articles by Felipe Restrepo

Felipe Restrepo

University of Western Ontario - Richard Ivey School of Business

Date Written: February 3, 2019

Abstract

This paper studies the bank credit and industry growth effects stemming from the introduction of a tax on bank debits. Using a sample of Latin American countries that implemented this tax at different times between 1986 and 2005, I exploit a key channel through which this levy affects the supply of credit: it creates a strong incentive to shift away from holding deposits and into using cash and other quasi-currencies. I find that taxing bank transactions has a significant negative effect on economic growth, mainly by reducing the growth prospects of industries that are more susceptible to financing frictions.

Keywords: Bank account debit taxes, bank transaction taxes, bank credit, industry growth

JEL Classification: G21, G30, E44, H22

Suggested Citation

Restrepo, Felipe, The Effects of Taxing Bank Transactions on Bank Credit and Industrial Growth: Evidence from Latin America (February 3, 2019). Journal of International Money and Finance (2019). Available at SSRN: https://ssrn.com/abstract=2994163 or http://dx.doi.org/10.2139/ssrn.2994163

Felipe Restrepo (Contact Author)

University of Western Ontario - Richard Ivey School of Business ( email )

1255 Western Road
London, Ontario N6G 0N1
Canada

HOME PAGE: http://www.ivey.uwo.ca/faculty/directory/felipe-restrepo/

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