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Relaxing Credit Constraints in Emerging Economies: The Impact of Public Loans on the Performance of Brazilian Manufacturers

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  • Filipe Lage de Sousa
  • Gianmarco I. P. Ottaviano

Abstract

n emerging economies credit constraints are often perceived as one of the most important market frictions hampering firm innovation and productivity growth in manufacturing. Huge amounts of public money are devoted to the removal of such constraints but their effectiveness is still subject to an intense policy debate. This paper contributes to this debate by analyzing the effects of the Brazilian Development Bank (BNDES) loans. Exploiting the unique features of a dataset on BNDES loans to Brazilian manufactures, it finds that: (a) credit constraints facing Brazilian manufacturing firms are real, especially for firms that apply to BNDES repeatedly; (b) BNDES funding has been successful in relaxing those credit constraints; (c) BNDES support has allowed granted firms to match the performance of similar unconstrained firms, at least in the short run, but not to outperform them.

Suggested Citation

  • Filipe Lage de Sousa & Gianmarco I. P. Ottaviano, 2014. "Relaxing Credit Constraints in Emerging Economies: The Impact of Public Loans on the Performance of Brazilian Manufacturers," CEP Discussion Papers dp1309, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp1309
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    Cited by:

    1. Fatma Bouattour, 2020. "Measuring financial constraints of Brazilian industries: Rajan and Zingales index revisited," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 29(6), pages 677-710, August.
    2. Lage de Sousa, Filipe & Ottaviano, Gianmarco I.P., 2018. "Relaxing credit constraints in emerging economies: The impact of public loans on the productivity of Brazilian manufacturers," International Economics, Elsevier, vol. 154(C), pages 23-47.
    3. Fatma Bouattour, 2016. "Financial Constraints and Export Performances: Evidence from Brazilian Micro-Data," Working Papers DT/2016/18, DIAL (Développement, Institutions et Mondialisation).
    4. de Menezes Barboza, Ricardo & Vasconcelos, Gabriel F.R., 2019. "Measuring the aggregate effects of the Brazilian Development Bank on investment," The North American Journal of Economics and Finance, Elsevier, vol. 47(C), pages 223-236.

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    More about this item

    Keywords

    credit constraints; firm performance; firm productivity; firm investment; public loans;
    All these keywords.

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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