Judicial Indicators and Business Cycles in Brazil

Abstract

This paper presents an innovative data set of judicial indicators in Brazil, based on the contents of court digital diaries (Diario da Justica Eletronico) for the state of Sao Paulo. These daily, well-structured text records allow computing aggregate, highfrequency court data for new cases, resolved cases and case-activity in general, as well as case type-level data, for a broad range of legal subjects including eviction, foreclosures, debt instruments, bankruptcy, dissolution of partnership, tax, indemnities, alimony, among others. The dataset also includes business starts, extracted from the commercial registry diary. Text records also allow monitoring litigation activity of the financial sector, which is related to credit market conditions. Ease of computation and timeliness makes this dataset attractive as potential leading or coincident indicators of economic activity and therefore, suitable for nowcasting. The first part of the paper presents the methodology of this novel panel dataset. The second part presents, based on standard time-series methods, an assessment of the predictive power of proposed judicial indicators in anticipating the path of a vector of business cycle variables. Results suggest that the novel set of judicial indicators improves forecasting in the short-run up to three months, relatively to benchmark models as well as relatively to “market” forecasts of the “present”. Relationships between judicial and economic indicators are discussed, particularly in the case of the credit market-related indicators. Results are in line with Fama and French (1989), Stock and Watson (1989), Chen (1991) and Gilchrist and Zakrajˇsek (2011), which suggest that delinquency rates and market risk premium are important predictors of business conditions.