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Private Banking Credit and Economic Growth in Mexico: A State Level Panel Data Analysis 2005-2018

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  • Torre Cepeda Leonardo E.
  • Flores Segovia Miguel A.

Abstract

The paper investigates the effect of banking credit to private agriculture, industrial and services sectors, on per capita GDP growth in Mexico using panel data at the state level for the period 2005-2018. The estimation controls for variables related to infrastructure, public expenditure, exports, inflation, human capital, a dummy for the 2008-2009 global financial crisis, and introduces a lag of the dependent variable in order to consider its likely persistence. Using the Generalized Method of Moments in order to control for possible endogenous effects among the variables, it is estimated that a 10%increase in the ratio of banking credit to GDP increases per capita GDP growth at the state level between 0.61 and 0.81 percentage points. These results underline the relevance of policy measures designed to promote a healthy functioning of the financial system in Mexico.

Suggested Citation

  • Torre Cepeda Leonardo E. & Flores Segovia Miguel A., 2020. "Private Banking Credit and Economic Growth in Mexico: A State Level Panel Data Analysis 2005-2018," Working Papers 2020-17, Banco de México.
    • Handle: RePEc:bdm:wpaper:2020-17
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    File URL: https://www.banxico.org.mx/publicaciones-y-prensa/documentos-de-investigacion-del-banco-de-mexico/%7B7B135C9F-CC2C-B5D8-A73F-02AE7519E04F%7D.pdf
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    More about this item

    Keywords

    Banking Credit; Economic Growth; Regional Analysis; Mexico;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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