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Limited Market Participation, Financial Intermediaries,And Endogenous Growth

  • Hiroaki OHNO


    (Department of Economics, Tokyo International University, Japan)

This paper analyzes the role of imperfect asset markets and financial intermediaries in determining the equilibrium growth rate of the capital stock by incorporating exogenous market participation constraints into an overlapping generation¡¯s economy. Economic growth and social welfare monotonically increase with the degree of market participation. Hence, economies with financial intermediaries have a stronger potential for a higher growth rate than economies with imperfect markets lacking such institutions.

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Article provided by Better Advances Press, Canada in its journal Review of Economics & Finance.

Volume (Year): 1 (2011)
Issue (Month): (August)
Pages: 53-62

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Handle: RePEc:bap:journl:110404
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  1. Gale, D. & Allen, F., 1991. "Limited Market Participation and Volatility of Asset Prices," Weiss Center Working Papers 14-91, Wharton School - Weiss Center for International Financial Research.
  2. Williamson, Stephen D., 1994. "Liquidity and market participation," Journal of Economic Dynamics and Control, Elsevier, vol. 18(3-4), pages 629-670.
  3. Annette Vissing-Jorgensen, 2002. "Limited Asset Market Participation and the Elasticity of Intertemporal Substitution," Journal of Political Economy, University of Chicago Press, vol. 110(4), pages 825-853, August.
  4. Levine, Ross, 2002. "Bank-Based or Market-Based Financial Systems: Which Is Better?," Journal of Financial Intermediation, Elsevier, vol. 11(4), pages 398-428, October.
  5. Weil, P., 1991. "Hand-to-Mouth Consumers and Asset Prices," Harvard Institute of Economic Research Working Papers 1562a, Harvard - Institute of Economic Research.
  6. Devereux, Michael B & Smith, Gregor W, 1994. "International Risk Sharing and Economic Growth," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 535-50, August.
  7. S. Rao Aiyagari, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 659-684.
  8. Paul M Romer, 1999. "Increasing Returns and Long-Run Growth," Levine's Working Paper Archive 2232, David K. Levine.
  9. Levine, Ross, 1996. "Financial development and economic growth : views and agenda," Policy Research Working Paper Series 1678, The World Bank.
  10. Annette Vissing-Jorgensen, 2002. "Towards an Explanation of Household Portfolio Choice Heterogeneity: Nonfinancial Income and Participation Cost Structures," NBER Working Papers 8884, National Bureau of Economic Research, Inc.
  11. S. Rao Aiyagari, 1994. "Uninsured Idiosyncratic Risk and Aggregate Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 109(3), pages 659-684.
  12. Ohno, Hiroaki, 2009. "Incomplete market participation, endogenous endowment risks and welfare," Journal of Economics and Business, Elsevier, vol. 61(5), pages 392-403, September.
  13. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
  14. N. Gregory Mankiw & Stephen P. Zeldes, 1990. "The Consumption of Stockholders and Non-Stockholders," NBER Working Papers 3402, National Bureau of Economic Research, Inc.
  15. Hiroaki Ohno, 2010. "Risk-Sharing Externalities and Its Implications for Equity Premium in an Infinite-Horizon Economy," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 4(2), pages 168-188, June.
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