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Borrowing constraints, financial development and the aggregate savings: Theory and evidence

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  • Wang, Pengfei
  • Xu, Lifang
  • Xu, Zhiwei

Abstract

In most countries, both firms and households face borrowing constraints. Based on this fact, the paper builds a dynamic general equilibrium model with borrowing constraints on both households and firms. The model implies that the relationship between financial development and the saving rate is non-monotonic. The paper also provides some empirical evidence that supports this prediction. This non-monotonic relationship has several important implications.

Suggested Citation

  • Wang, Pengfei & Xu, Lifang & Xu, Zhiwei, 2025. "Borrowing constraints, financial development and the aggregate savings: Theory and evidence," Emerging Markets Review, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:ememar:v:66:y:2025:i:c:s1566014125000317
    DOI: 10.1016/j.ememar.2025.101282
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    References listed on IDEAS

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