Creditor Protection and Credit Response to Shocks

48 Pages Posted: 21 Feb 2005

See all articles by Arturo José Galindo

Arturo José Galindo

Inter-American Development Bank

Alejandro Micco

University of Chile

Date Written: April 2007


This paper studies the relationship between creditor protection and credit response to macroeconomic shocks. Using a dataset on legal determinants of finance in a panel of data of aggregate credit growth for a sample of 79 countries during the period 1990-2004, it shows that credit is more responsive to external shocks in countries with weak legal creditor protection and weak enforcement. The results are statistically and economically significant and robust to alternative measures of creditor protection, the inclusion of variables that reflect different stages of economic development, the restriction of the sample to only developing countries, controlling for systemic crises, alternative shock measures, and to VAR specifications.

Keywords: Law and Finance, Credit, Volatility

JEL Classification: G31, G33, K2

Suggested Citation

Galindo, Arturo José and Micco, Alejandro, Creditor Protection and Credit Response to Shocks (April 2007). Available at SSRN: or

Arturo José Galindo (Contact Author)

Inter-American Development Bank ( email )

1300 New York Avenue NW
Washington, DC 20577
United States

Alejandro Micco

University of Chile ( email )

Pío Nono Nº1, Providencia
Santiago, R. Metropolitana 7520421

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