We are grateful to three anonymous referees and the editor for extensive comments. All remaining errors are ours.
SHORTER PAPERS, DISCUSSIONS, AND LETTERS
Finance and Property Rights: Exploring Other Directions
Article first published online: 26 MAR 2014
© 2014 The Ohio State University
Journal of Money, Credit and Banking
Volume 46, Issue 2-3, pages 503–517, March-April 2014
How to Cite
BOSE, N., MURSHID, A. P. and RATH, C. (2014), Finance and Property Rights: Exploring Other Directions. Journal of Money, Credit and Banking, 46: 503–517. doi: 10.1111/jmcb.12114
- Issue published online: 26 MAR 2014
- Article first published online: 26 MAR 2014
- Manuscript Accepted: 26 JUL 2013
- Manuscript Received: 21 DEC 2012
- financial development;
- property rights
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.