Measuring the aggregate effects of the Brazilian Development Bank on investment

•The Brazilian Development Bank had a positive impact on investment during the 2002–2016 period.•This impact is less than expected by development banks enthusiasts.•The evidence points to some degree of fund substitution.•We raise the question of whether the bank could use its resources more efficie...

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Bibliographic Details
Published in:The North American journal of economics and finance 2019-01, Vol.47, p.223-236
Main Authors: de Menezes Barboza, Ricardo, Vasconcelos, Gabriel F.R.
Format: Article
Language:English
Subjects:
Development banks
Governmental loans Bayesian VAR
Investment
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Summary:•The Brazilian Development Bank had a positive impact on investment during the 2002–2016 period.•This impact is less than expected by development banks enthusiasts.•The evidence points to some degree of fund substitution.•We raise the question of whether the bank could use its resources more efficiently. In this paper, we show that the Brazilian Development Bank (BNDES), one of the largest development banks in the world, had a positive and statistically significant impact on Brazilian aggregate investment during the 2002–2016 period. Each $1 BRL of BNDES loans increased the investment on average by $0.46 BRL. Our results lie between what is alleged by BNDES critics (zero impact) and what is claimed by unconditional advocates of state-owned banks (impact near one). In addition, our results are compatible with micro evidence on the effects of BNDES. We obtained these results using the impulse responses from a large Bayesian VAR and we used double selection inference for robustness.
ISSN:1062-9408
1879-0860
DOI:10.1016/j.najef.2018.12.013