Courts and Banks: Effects of Judicial Enforcement on Credit Markets

@article{Jappelli2005CourtsAB,
  title={Courts and Banks: Effects of Judicial Enforcement on Credit Markets},
  author={Tullio Marco Magda Jappelli and T. Pagano and Tullio Marco Magda Bianco},
  journal={Journal of Money, Credit, and Banking},
  year={2005},
  volume={37},
  pages={223 - 244}
}
The cost of enforcing contracts is a key determinant of market performance. We document this point with reference to the credit market in a model of opportunistic debtors and inefficient courts. According to the model, improvements in judicial efficiency should reduce credit constraints and increase lending, with an ambiguous effect on interest rates that depends on banking competition and on the type of judicial reform. These predictions are supported by panel data on Italian provinces. In… CONTINUE READING

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