Microeconomic aspects of credit constraints in Peru: 1997–2000

This study investigates the existence of credit constraints in Peru during the period 1997–2000, in the context of the international financial crisis that impacted the banking system. The research examines how the decline in credit to the private sector can be explained not only by a lack of liquidity but also by an increase in the perceived risk of non-performing loans, which inhibits lending. A fixed-effects panel analysis is used to estimate a model that relates credit to the private sector to supply and demand factors, considering non-performing loans as a critical indicator. The empirical results indicate that both supply factors (lending capacity, non-performing loans, credit leverage) and demand factors (economic activity) influence credit. However, credit constraints are evident among large banks, where non-performing loans have a significant impact. The suggested policy implications highlight that monetary expansion that does not address the risk of default and stimulate the economy will not guarantee an increase in credit to the private sector. (Abstract and audio: Department of Economic Publications)