Saving-Investment Correlations and Government Policy under Credit Constraints
AbstractIn this paper, we develop two topics of the current literature on credit markets under asymmetric information. First, we present an explanation based on credit constraints for the high observed correlation between national investment and national savings. In this respect, we can explain some of the findings of Felstein and Horioka (1980), but in a context of perfectly integrated capital markets. Second, we discuss the role of government intervention to promote investment under credit constraints. We see how asymmetric information in credit markets may modify the results of a policy with respect to the usual effects in a world without information problems and under what conditions some policies may succeed in increasing investment.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 1994004.
Date of creation: 01 Feb 1994
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