A macro-level analysis of the role of development financial institutions in periods of global financial and economic crisis: the case of BNDES in Brazil

Abstract

Following the Great Recession of 2007/08, development economists began to place emphasis on the role of development banks as vital public financial institutions. With a principal focus on the National Bank of Economic and Social Development in Brazil (BNDES), this research study analyses its role as a counter-cyclical lender within a context of global banking credit crunch. By using South Africa as a counterfactual scenario, the study finds that the responses of the BNDES were key in mitigating the effects of the financial turmoil. Whilst highlighting the relevance and essential function of a credit system that supports the productive realm of the economy, the conclusions of this study provide a valuable lesson to South Africa and other emerging market economies (EMEs) – channelled credit growth can be instrumental in addressing cyclical gaps in capital.