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This paper examines the effects of expanding access to credit on the decisions and welfare of households. It focuses on the entry of Banco Azteca, the first bank in Mexico targeting households from the informal sector. Panel data suggest that informal households in municipalities with Banco Azteca branches experienced several changes in their saving, credit and consumption patterns. In order to estimate the impact of Azteca's entry, the paper develops a dynamic model of household choices in which the bank is endogenously selecting the municipalities for branch openings. The analysis finds that in municipalities in which the bank entered, households were better able to smooth their consumption and accumulate more durable goods even though the overall proportion of households that save went down by 6.6 percent. These results suggest that the use of savings as a buffer on income fluctuations declines once formal credit is available. What is more, these effects vary across households. Among informal households, those who never receive formal job offers have the highest decline in saving rates. The model is also used to evaluate a legislation to cap interest rates levied by formal credit institutions. Simulations suggest that if the Mexican government were to cap the interest rate of Azteca at the rate for traditional banks, Azteca would stop operating in the poorest and least populated municipalities.
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This Selected Issues paper estimates the optimal allocation of government current spending, precautionary saving, and investment for Kuwait under uncertainty. The results show that in the face of high oil income volatility and the expected decline in oil prices, projected current spending exceeds the optimal amount over the medium term (2013–2018). However, there is room to increase investment spending, which should contribute to the growth of the tradable sector, as the projected investment rate is lower than the optimal investment rate of 20 percent of government income.
Kuwait --- Koweit --- Kuwayt --- Kuvayt --- Kuveĭt --- Dowlat al Kuwait --- Dawlat al-Kuwayt --- State of Kuwait --- Economic conditions. --- Economic policy. --- Banks and Banking --- Investments: Energy --- Exports and Imports --- Labor --- Macroeconomics --- Finance: General --- Aggregate Factor Income Distribution --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Macroeconomics: Consumption --- Saving --- Wealth --- Energy: Demand and Supply --- Prices --- Energy: General --- Financial Institutions and Services: Government Policy and Regulation --- Banking --- Labour --- income economics --- Investment & securities --- Financial services law & regulation --- Finance --- Income --- Oil prices --- Consumption --- Precautionary savings --- National accounts --- Capital adequacy requirements --- Financial regulation and supervision --- Commercial banks --- Financial institutions --- Banks and banking --- Economics --- Saving and investment --- Asset requirements
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