On government credit programs
AbstractCredit rationing is a common feature of most developing economies. In response to it, the governments of these countries often operate extensive credit programs and lend, either directly or indirectly, to the private sector. We analyze the macroeconomic consequences of a typical government credit program in a small open economy. We show that such programs increase long-run production if the economy is in a development trap and that such programs often lead to endogenously arising aggregate volatility. On the other hand, they may eliminate certain indeterminacies created by endogenous credit market frictions.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Atlanta in its series Working Paper with number 98-2.
Date of creation: 1998
Date of revision:
Other versions of this item:
- NEP-ALL-1998-12-09 (All new papers)
- NEP-PBE-1998-12-09 (Public Economics)
- NEP-PUB-1998-12-09 (Public Finance)
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