No abstract

The present paper distinguishes how the type of bank that provides loans is related to GDP per capita in Brazilian municipalities between 2007 and 2016. A unique data set allows us to discriminate between the effects of credits operated by either private or public commercial banks, and loans provided by the national development bank BNDES either directly or indirectly through accredited financial institutions. Using the system GMM estimator, we find that credit from public commercial banks has the highest effect on economic growth but it is concentrated in the most populated municipalities. Moreover, indirect BNDES loans show a robust and significantly positive relation to local GDP given that this lending facility especially targets firms in small, credit constrained regions, and it was provided non-cyclically.