On the allocation of credit and aggregate fluctuations
AbstractRecent literature on financial development and growth has highlighted the possibility of endogenous business cycles arising for particular levels of a given credit multiplier. These studies concentrate on loans directed to the productive activity and neglect the role of credit to consumption. In this note, we consider an endogenous growth model, where a representative agent must choose how to allocate credit; basically, the agent considers a simple rule where the share of credit to consumption reacts to deviations of the consumption – wealth ratio relatively to the corresponding steady state level. The setup generates nonlinear dynamics, which are analyzed both locally and globally.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 2889.
Date of creation: Mar 2007
Date of revision:
Financial development; Credit to consumption; Endogenous growth; Endogenous cycles; Nonlinear dynamics;
Other versions of this item:
- Orlando Gomes, 2010. "On the Allocation of Credit and Aggregate Fluctuations," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 64(4), pages 393-404, December.
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-28 (All new papers)
- NEP-DGE-2007-04-28 (Dynamic General Equilibrium)
- NEP-FDG-2007-04-28 (Financial Development & Growth)
- NEP-MAC-2007-04-28 (Macroeconomics)
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