Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/115495 
Year of Publication: 
2014
Series/Report no.: 
IDB Working Paper Series No. IDB-WP-548
Publisher: 
Inter-American Development Bank (IDB), Washington, DC
Abstract: 
This paper augments a relatively standard dynamic general equilibrium model with financial frictions in order to quantify the macroeconomic effects of the credit deepening process observed in many Latin American (LA) countries in the last decade, most notably in Brazil. In the model, a stylized banking sector intermediates credit from patient households to impatient households and firms. The key novelty of the paper, motivated by the Brazilian experience, is to model the credit constraint faced by (impatient) households as a function of future labor income. In the calibrated model, credit deepening generates only modest abovetrend growth in consumption, investment, and GDP. Since Brazil has experienced one of the most intense credit deepening processes in Latin America, it is argued that the quantitative effects for other LA economies are unlikely to be sizeable.
Subjects: 
Credit deepening
Financial frictions
Consignado credit
Payroll lending
JEL: 
E20
E44
E51
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper

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