Working Papers
Judicial discretion, credit, and the real economy (with Leonardo S. Alencar)
Coverage: Valor Econômico and Veja
We investigate how court rulings influenced by judges’ preferences affect banks’ views on local courts’ protection of creditor rights, their lending practices, and the ultimate effects on business performance. Leveraging the random assignment of judges to cases brought against financial institutions, we demonstrate that banks restrict credit after observing unfavorable decisions issued by pro-debtor judges in disputes involving them. This informational shock is transmitted to firms within banks’ relationships through credit rationing for small businesses, adversely affecting their performance. Our research highlights the significant role of judges in shaping economic activity beyond the immediate parties involved in a legal conflict.
Trade liberalization and interregional credit reallocation
Reject and Resubmit, Journal of International Economics
This paper studies how Brazil's trade liberalization reshaped regional credit allocation and local labor markets. Regions more exposed to tariff reductions experienced capital outflows, while those financially connected to hard-hit localities saw an increase in credit availability and employment. The findings highlight how bank branch networks facilitate spatial credit reallocation and show that access to credit helps workers transition from the tradable to the non-tradable sector. The documented credit outflow from hard-hit localities provides novel empirical support for capital reallocation as a key mechanism driving trade liberalization's growing and persistent effects on regional labor markets, as suggested in previous works.
Work in progress
Credit market intervention during non-crisis periods (draft coming soon)
This paper examines how an increase in credit supply from government banks impacts wages and production at the municipality level in Brazil. The intervention started in 2011, and to overcome endogeneity concerns about the presence of public banks, I exploit an acquisition episode carried out by the main federal bank two years earlier. The results indicate a significant increase in total credit after 2011 in municipalities where the government bank was introduced in 2009. At the same time, these localities also observed a reduction in total product and wages for nontradable firms. These findings align with the idea of credit misallocation harming aggregate economic performance.
This paper investigates how judicial decisions in lawsuits between individuals and banks affect the financial behavior of co-workers connected to the plaintiffs. Using judge fixed effects to isolate exogenous variation in case outcomes, we show that lawsuit results send signals to peers about the likelihood of debt relief, changing their incentives to borrow. By analyzing this spillover effect, the study highlights the broader societal impact of judicial decisions, illustrating how judges shape financial behavior and the resolution of contractual conflicts.