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Title: Courts and Credit in Mexico
Authors: Villarreal, Aron
Advisors: Sims, Christopher A.
Department: Economics
Certificate Program: Finance Program
Class Year: 2017
Abstract: I study the effect of efficiency in commercial law enforcement on lendingvolume and default rate in the Mexican credit market. I focus in credit bycommercial banks going to the private sector and the private housing sector.By using factor analysis, I construct variables for the quality, fairness andspeed of the judicial branch of government of the 32 Mexican federal entitiesin the years 2003, 2006, 2008, 2010 and 2012. I regress lending volumeand default rate on these judicial variables under a random effects model.Because I have more detailed data for the last two versions of the study, Ialso use a first difference model for the years 2010 and 2012. My findingsagree with the results of other longitudinal studies in Latin America: moreefficient commercial law enforcement increases lending volume and decreasesthe default rate of the credit market. In particular, I find that when thejudicial system is more efficient, commercial banks lend more possibly becausetheir loans have higher expected returns and homeowners default lessbecause their collateral is more efficiently seized.
Type of Material: Princeton University Senior Theses
Language: en_US
Appears in Collections:Economics, 1927-2019

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