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Limited Market Participation, Financial Intermediaries,And Endogenous Growth

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  • Hiroaki OHNO

    ()
    (Department of Economics, Tokyo International University, Japan)

Abstract

This paper analyzes the role of imperfect asset markets and financial intermediaries in determining the equilibrium growth rate of the capital stock by incorporating exogenous market participation constraints into an overlapping generation¡¯s economy. Economic growth and social welfare monotonically increase with the degree of market participation. Hence, economies with financial intermediaries have a stronger potential for a higher growth rate than economies with imperfect markets lacking such institutions.

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Bibliographic Info

Article provided by Better Advances Press, Canada in its journal Review of Economics & Finance.

Volume (Year): 1 (2011)
Issue (Month): (August)
Pages: 53-62

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Handle: RePEc:bap:journl:110404

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Keywords: Limited market participation; Financial intermediaries; Endogenous growth model;

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  2. Mankiw, N. Gregory & Zeldes, Stephen P., 1991. "The consumption of stockholders and nonstockholders," Journal of Financial Economics, Elsevier, Elsevier, vol. 29(1), pages 97-112, March.
  3. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series, The World Bank 1678, The World Bank.
  4. Aiyagari, S Rao, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 109(3), pages 659-84, August.
  5. Michael B. Devereux & Gregor W. Smith, 1991. "International Risk Sharing and Economic Growth," Working Papers, Queen's University, Department of Economics 829, Queen's University, Department of Economics.
  6. Ross Levine, 2002. "Bank-Based or Market-Based Financial Systems: Which is Better?," NBER Working Papers 9138, National Bureau of Economic Research, Inc.
  7. Annette Vissing-Jorgensen, 2002. "Towards an Explanation of Household Portfolio Choice Heterogeneity: Nonfinancial Income and Participation Cost Structures," NBER Working Papers 8884, National Bureau of Economic Research, Inc.
  8. Hiroaki Ohno, 2010. "Risk-Sharing Externalities and Its Implications for Equity Premium in an Infinite-Horizon Economy," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 4(2), pages 168-188, June.
  9. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, American Economic Association, vol. 77(2), pages 56-62, May.
  10. Williamson, Stephen D., 1994. "Liquidity and market participation," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 18(3-4), pages 629-670.
  11. Allen, F. & Gale, D., 1991. "Limited Market Participation and Volatility of Asset Prices," Weiss Center Working Papers, Wharton School - Weiss Center for International Financial Research 2-92, Wharton School - Weiss Center for International Financial Research.
  12. Weil, P., 1991. "Hand-to-Mouth Consumers and Asset Prices," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 1562a, Harvard - Institute of Economic Research.
  13. Annette Vissing-Jorgensen, 2002. "Limited Asset Market Participation and the Elasticity of Intertemporal Substitution," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 110(4), pages 825-853, August.
  14. Ohno, Hiroaki, 2009. "Incomplete market participation, endogenous endowment risks and welfare," Journal of Economics and Business, Elsevier, Elsevier, vol. 61(5), pages 392-403, September.
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