Relative Price Stability, Creditor Rights, and Financial Deepening

Author/Editor:

Pablo F Druck ; Alexander Plekhanov ; Mario Dehesa

Publication Date:

June 1, 2007

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The paper provides a theoretical and cross-country empirical analysis of the determinants of financial deepening, and finds that higher credit-to-GDP ratios are associated with stronger creditor rights and lower inflation, and that the marginal effect of improvements in creditor rights protection is declining as the rate of inflation increases. The analysis suggests that in a high inflation environment, controlling inflation and reducing macroeconomic volatility should be given priority. Once these goals are achieved, the focus of attention should shift to creditor rights protection and credit information management.

Series:

Working Paper No. 2007/139

Subject:

Banking Credit Domestic credit Inflation Self-employment

English

Publication Date:

June 1, 2007

ISBN/ISSN:

9781451867039/1018-5941

Stock No:

WPIEA2007139

Pages:

21

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