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Financial Intermediation, Variability and the Development Process

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Author Info
Luis Carranza
Jose E. Galdon-Sanchez

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Abstract

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.

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Paper provided by Suntory and Toyota International Centres for Economics and Related Disciplines, LSE in its series STICERD - Development Economics Papers with number 21.

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Date of creation: Mar 2000
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Handle: RePEc:cep:stidep:21

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Keywords: Externalities market imperfections growth multiple equilibria sunspot equilibria

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Schclarek, Alfredo, 2006. "Industry Diversification, Financial Development and Productivity-Enhancing Investments," Working Papers 2006:19, Lund University, Department of Economics. [Downloadable!]
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