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Finance and Property Rights: Exploring Other Directions
Author(s) -
BOSE NILOY,
MURSHID ANTU PANINI,
RATH CHITRALEKHA
Publication year - 2014
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12114
Subject(s) - property rights , panel data , point (geometry) , index (typography) , standard deviation , business , property (philosophy) , basis point , generalized method of moments , finance , economics , econometrics , interest rate , mathematics , statistics , microeconomics , computer science , philosophy , geometry , epistemology , world wide web
There is a consensus that stronger property rights advance financial development. We provide evidence that the reverse hypothesis is also true. We isolate the structural component in the finance–property rights relationship using an instrument for financial development (private credit) based on an index of exposure to foreign crises, in addition to generalized method of moments approaches for panel data. Our results suggest a one standard deviation increase in private credit from its average in 2005 translates into a 0.5‐ to 1.0‐point increase in property rights. To contextualize this, the difference in property rights between Israel and Uruguay, two countries separated by about one standard deviation in the volume of private credit, was 0.67 points.