Carranza, Luis and Galdón-Sánchez, Jose E.
Financial intermediation, variability and the development process.
Suntory and Toyota International Centres for Economics and Political Science, London School of Economics and Political Science, London, UK.
In this paper we have built a model of financial intermediation that explains the GDP variability pattern of an economy during the development process. In our model, per capita is more volatile in the middle-income economies than in both low and high-income economies. We show that, if the model economy is in the early or in the mature stages of development there is a unique equilibrium. However, in the middle stages of development multiple equilibria arise. Moreover, we find that in economies with imperfect credit markets, per capita output volatility tends to be higher than in economies with perfect or non-existent credit markets.
||© 2000 Luis Carranza and Jose E. Galdón-Sánchez
||Externalities, market imperfections, growth, multiple equilibria, sunspot equilibria
|Library of Congress subject classification:
||H Social Sciences > HG Finance
|Journal of Economic Literature Classification System:
||O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
O - Economic Development, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General
E - Macroeconomics and Monetary Economics > E0 - General > E00 - General
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Research centres and groups > Suntory and Toyota International Centres for Economics and Related Disciplines (STICERD)
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