Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/89087
Authors: 
Becerra, Oscar
Cavallo, Eduardo
Scartascini, Carlos
Year of Publication: 
2010
Series/Report no.: 
IDB Working Paper Series IDB-WP-207
Abstract: 
Although financial development is good for long-term growth, not all countries pursue policies that render full financial development. This paper builds on an extensive political economy literature to construct a theoretical model showing that the intensity of opposition to financial development by incumbents depends on both their degree of credit dependency and the role of governments in credit markets. Empirical evidence for this claim is provided, and the results suggest that lower opposition to financial development leads to an effective increase in credit marketsÂ’ development only in those countries that have high government capabilities. Moreover, improvements in government capabilities have a significant impact on credit market development only in those countries where credit dependency is high (thus, opposition is low). This paper therefore contributes to this rich literature by providing a unified account of credit market development that includes two of its main determinants, traditionally considered in isolation.
Subjects: 
Financial development
Interest groups
Political economy
Government capabilities
JEL: 
G10
G18
G20
G38
O16
D72
Document Type: 
Working Paper

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