Does judicial efficiency lower the cost of credit

Luc Laeven and Giovanni Majnoni

No 3159, Policy Research Working Paper Series from The World Bank

Abstract: The authors investigate the effect of judicial efficiency on banks'lending spreads for a large cross section of countries. They measure bank interest rate spreads for 106 countries at an aggregate level, and for 32 countries at the level of individual banks. The authors find that-after controlling for a number of other country characteristics-judicial efficiency, in addition to inflation, is the main driver of interest rate spreads across countries. This suggests that in addition to improving the overall macroeconomic climate in a country, judicial reforms, through a better enforcement of legal contracts, are critical to lowering the cost of financial intermediation for households and firms.

Keywords: Payment Systems&Infrastructure; International Terrorism&Counterterrorism; Economic Theory&Research; Environmental Economics&Policies; Banks&Banking Reform; Banks&Banking Reform; Economic Theory&Research; Environmental Economics&Policies; Financial Intermediation; International Terrorism&Counterterrorism (search for similar items in EconPapers)
Date: 2003-10-01
New Economics Papers: this item is included in nep-law
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Citations: View citations in EconPapers (14)

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Journal Article: Does judicial efficiency lower the cost of credit? (2005)
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