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The Brazilian Payroll Lending Experiment

Christiano A. Coelho¹; João M. P. De Mello; Bruno Funchal²

¹ Instituto Brasileiro de Mercado de Capitais · ² Fucape Business School

In December 2003, the Brazilian Congress passed a law that led to a natural personal lending experiment. The law allows banks to offer loans with repayment through automatic payroll deduction, which, in effect, turns future income into collateral. We estimate the impact of the new law using auto loans as a control group. The law has caused a reduction in interest rates and an increase in the volume of personal credit.

DOI

10.1162/rest_a_00228

Volume

94 (4)

Pages

925-934

Language

en

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BibTeX

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