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A Note on the Effect of Decomposing Credit for Explaining Brazilian Cross-State GDP Growth

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  • Matos, Paulo Rogério Faustino
  • dos Santos, Davi Albuquerque Vieira

Abstract

We add to the literature on financial system and development by proposing an empirical exercise to better understand the channels through which credit drivers are able or not to promote economic growth. Methodologically, we estimate an extend version in difference of Barro-style growth panel regression. We measure the individual impact on the Brazilian cross-state GDP growth from 2003 to 2017 of household credit, enterprise credit and government credit, controlling for exports, imports, years of schooling, current and capital government expenditures. We find that Brazilian cross-state growth depends more on the evolution of household credit than on credit to firms. We claim that regardless of the benefits due to household credit, we need to better understand the behavior of this insolvent economic growth driver, given its prominent role in the credit market. We also highlight the negative role played by government credit to GDP given by the significant elasticity of -0.87.

Suggested Citation

  • Matos, Paulo Rogério Faustino & dos Santos, Davi Albuquerque Vieira, 2020. "A Note on the Effect of Decomposing Credit for Explaining Brazilian Cross-State GDP Growth," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 74(2), June.
    • Handle: RePEc:fgv:epgrbe:v:74:y:2020:i:2:a:78246
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    1. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    2. Paulo Matos & Joyciane Vasconcelos & Christiano Penna, 2013. "Política Creditícia No Brasil: O Sertão Vai Virar Mar?," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 14(1c), pages 703-731.
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