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Growth Model with Financial Deepening and Productivity Heterogeneity

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  • Quoc Hung Nguyen

    (University of Hyogo)

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, Springer, vol. 70(1), pages 123-140, March.
    • Handle: RePEc:spr:jecrev:v:70:y:2019:i:1:d:10.1111_jere.12180
    DOI: 10.1111/jere.12180
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    References listed on IDEAS

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    1. repec:bcp:journl:v:8:y:2024:i:1:p:2449-2470 is not listed on IDEAS
    2. 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.
    3. 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.
    4. 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.
    5. 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.
    6. Hayat Khan & Sher Khan & Fan Zuojun, 2022. "Institutional Quality and Financial Development: Evidence from Developing and Emerging Economies," Global Business Review, International Management Institute, vol. 23(4), pages 971-983, August.

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    Keywords

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    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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