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Consumption, investment and financial intermediation in a Ramsey model


  • Keshab Bhattarai


The productivity of capital and the discount rate for future consumption are more important for economic growth than the cost of financial intermediation. Using analytical and numerical illustrations from a version of the Ramsey model this study illustrates how parameters of preferences in consumption, productivity and depreciation rates of capital and costs of financial intermediation interact and determine the levels of output, consumption, investment and capital stock in a growing economy.

Suggested Citation

  • Keshab Bhattarai, 2005. "Consumption, investment and financial intermediation in a Ramsey model," Applied Financial Economics Letters, Taylor and Francis Journals, vol. 1(6), pages 329-333, November.
  • Handle: RePEc:taf:apfelt:v:1:y:2005:i:6:p:329-333

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    References listed on IDEAS

    1. Cheolbeom Park & Pei Fang Lim, 2004. "Excess sensitivity of consumption, liquidity constraints, and mandatory saving," Applied Economics Letters, Taylor & Francis Journals, vol. 11(12), pages 771-774.
    2. Richard Blundell & Ian Preston, 1998. "Consumption Inequality and Income Uncertainty," The Quarterly Journal of Economics, Oxford University Press, vol. 113(2), pages 603-640.
    3. Faruk Gul & Wolfgang Pesendorfer, 2004. "Self-Control and the Theory of Consumption," Econometrica, Econometric Society, vol. 72(1), pages 119-158, January.
    4. Costas Meghir, 2004. "A Retrospective on Friedman's Theory of Permanent Income," Economic Journal, Royal Economic Society, vol. 114(496), pages 293-306, June.
    5. Pagano, Marco, 1993. "Financial markets and growth: An overview," European Economic Review, Elsevier, vol. 37(2-3), pages 613-622, April.
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