Spatial Disparities and Credit Market Segmentation: The Role of Informality in Mexico (2004 - 2024)

This study examines the structural failures of Mexico’s credit market from 2004 to 2024. Despite financial stabilization and liberalization, credit access remains fragmented and unequal. Using disaggregated state- and sector-level data, the paper evaluates how labor formalization, informality, economic activity, interest rates, and financial stability shape credit consumption across seven categories. Results challenge orthodox monetary models: interest rate movements have only marginal effects on aggregate credit demand. Instead, labor formalization and regional disparities dominate. Formal employment increases credit consumption, while informality, especially in the secondary sector, reduces it. Northern and border states absorb more credit due to higher industrialization and financial inclusion. Aggregate economic activity is negatively related to credit demand, suggesting reliance on internal or informal financing during expansions. The findings highlight monetary policy’s limited efficacy and the need for structural and regionally targeted reforms. JEL codes: G21, J21, G28, O17, R11, E52,