Credit Stagnation in Latin America
49 Pages Posted: 22 Apr 2002
Date Written: March 2002
This paper examines the recent marked slowdown in bank credit to the private sector in Latin America. Based on the study of eight countries (Argentina, Bolivia, Brazil, Chile, Colombia, Peru, Mexico, and Venezuela), the magnitude of the slowdown is documented, comparing it to historical behavior and to slowdown episodes in other regions of the world. Second, changes in bank balance sheets are examined, investigating whether the credit slowdown is merely a reflection of a slowdown in bank deposits, or whether the asset side has changed. Third, following an econometric disequilibrium approach used in recent studies of credit slowdowns in East Asia and Finland, the paper investigates possible causes for the slowdown in three countries: Colombia, Mexico, and Peru. While both supply and demand factors appear to have played key roles, their relative importance has varied across the three countries.
Keywords: credit, banking system, Latin America, monetary policy
JEL Classification: G21
Suggested Citation: Suggested Citation