Judicial Risk and Credit Market Performance

Ana Carla A. Costa and João M. P. De Mello

in Financial Markets Volatility and Performance in Emerging Markets

Published by University of Chicago Press

Published in print March 2008 | ISBN: 9780226184951
Published online February 2013 | e-ISBN: 9780226185040 | DOI:
Judicial Risk and Credit Market Performance

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This chapter outlines the recent evolution of the credit market in Brazil and the chronology of payroll lending, emphasizing the relevant events, such as the approval of a law regulating payroll lending for retirees and the judicial decision on the legality of payroll deductions. It argues that the presence of an identical product, except for deduction in payroll, provides a good control for associating changes in the institutional environment to market changes in payroll lending. The market-level evidence is a complement, not a substitute, to the aggregate-level evidence. While aggregate evidence indicates that institutional differences are of first-order importance in explaining variation in countries' performances, micro- and market-level evidence evaluate directly the implicit assumption necessary to interpret the aggregate evidence as indeed causal.

Keywords: credit market; Brazil; payroll lending; payroll deductions; judicial decision; retirees; legality

Chapter.  11791 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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