Speaker
Description
We examine how conflict and violence affect economic activity through their impact on the credit market, using Colombia’s peace process and agreement with the FARC guerrilla as a natural experiment. Our difference-in-differences analysis reveals a significant reduction in violence in municipalities formerly affected by the FARC, triggering a 12% increase in credit relative to deposits. Mechanisms include lower credit delinquency and a shift toward business financing. Additionally, we observe growth in bank branches and employment, indicating heightened competition among banks. Our results suggest that the peace process, which spurred an 8% growth in the manufacturing and a 6% growth in the service sector, positively affected economic activity in former FARC areas by increasing credit availability. More broadly, the findings emphasize the pivotal role of credit markets in facilitating economic recovery in post-conflict settings.
| Keyword | Conflict Economics |
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