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Growth Model with Financial Deepening and Productivity Heterogeneity

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  • Quoc Hung Nguyen

Abstract

This paper studies the effects of financial deepening on growth dynamics and productivity in an economy where heterogeneous entrepreneurs face endogenous borrowing constraints. Quantitative results from a calibrated model suggest that 38% of Japan's total factor productivity from 1961 to 1991 can be explained by the financial deepening effects and the convergence speed is 29% slower than that implied by neoclassical models. The present paper also theoretically shows that an economy with a higher degree of productivity heterogeneity is more likely to avoid the poverty trap and converge with a slower speed to its steady state.

Suggested Citation

  • Quoc Hung Nguyen, 2019. "Growth Model with Financial Deepening and Productivity Heterogeneity," The Japanese Economic Review, Japanese Economic Association, vol. 70(1), pages 123-140, March.
    • Handle: RePEc:bla:jecrev:v:70:y:2019:i:1:p:123-140
    DOI: 10.1111/jere.12180
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    Cited by:

    1. repec:bcp:journl:v:8:y:2024:i:1:p:2449-2470 is not listed on IDEAS
    2. Agne Setikiene & Mindaugas Butkus, 2021. "The Heterogeneous Impact of Financialisation on Economic Growth in the Long Run," JRFM, MDPI, vol. 14(5), pages 1-30, May.
    3. Sergio Salas & Kathleen Odell, 2020. "Financial Deepening, Credit Crises, Human Capital and Growth," Working Papers 2020-01, Escuela de Negocios y Economía, Pontificia Universidad Católica de Valparaíso.
    4. Nguyen Quoc Hung, 2020. "Financial deepening in a two-sector endogenous growth model with productivity heterogeneity," The B.E. Journal of Macroeconomics, De Gruyter, vol. 20(1), pages 1-19, January.
    5. Fernanda Cigainski Lisbinski & Heloisa Lee Burnquist, 2024. "Institutions and financial development: Comparative analysis of developed and developing economies," EconomiA, Emerald Group Publishing Limited, vol. 25(2), pages 347-376, May.

    More about this item

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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