The evolution of debt and equity markets in economic development
AbstractAs noted by Gurley and Shaw, there is a typical pattern of economic development in which the evolution of the financial system is an essential aspect of the growth process. We focus on one component of this evolution: the increasing importance of equity markets as an economy grows. We develop a growth model where capital accumulation is financed externally through a combination of debt and equity. We illustrate why equity market activity might grow - often very rapidly - as an economy develops. We also illustrate why access to equity markets may not be needed in the early stages of economic development.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Minneapolis in its series Working Papers with number 542.
Date of creation: 1995
Date of revision:
Publication status: Published in Economic Theory (Vol. 12, No. 3, November 1998, pp. 519-560)
Other versions of this item:
- Bruce D. Smith & John H. Boyd, 1998. "The evolution of debt and equity markets in economic development," Economic Theory, Springer, vol. 12(3), pages 519-560.
- E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
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