We augment a standard dynamic general equilibrium model with financial frictions, in order to quantify the macroeconomic effects of the credit deepening process observed in Latin America in the last decade - most notably in Brazil. In the model, a stylized banking sector intermediates credit...

This paper augments a relatively standard dynamic general equilibrium model with financial frictions in order to quantify the macroeconomic effects of the credit deepening process observed in many Latin American (LA) countries in the last decade, most notably in Brazil. In the model, a stylized...

In 2004, Brazil provided an interesting natural experiment concerning personal credit. A new law was enacted allowing banks to offer loans with repayment through automatic payroll or social security benefit deduction, thus removing a significant part of the moral hazard problem by eliminating...