Growth and Financial Liberalization under Capital Collateral Constraints: The Striking Case of the Stochastic AK model with CARA Preferences
We consider a small-open, collateral-constrained AK economy. We show that the combination of CARA preferences and uncertainty on capital inflows in such an economy generates long-term (expected) growth while the deterministic counterpart does not. In this framework, long-term growth is entirely driven by precautionary savings. In particular, we show that the asymptotic growth rate of the expected capital stock is an increasing function of both the risk parameter and the Arrow-Prat absolute risk aversion parameter. The model also predicts that economies that are more financially integrated through international borrowing experience lower consumption growth volatility relative to output growth volatility.
|Date of creation:||20 Sep 2013|
|Date of revision:||20 Sep 2013|
|Contact details of provider:|| Web page: http://www.amse-aixmarseille.fr/en|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Obstfeld, Maurice, 1992.
"Risk-Taking, Global Diversification, and Growth,"
CEPR Discussion Papers
688, C.E.P.R. Discussion Papers.
- Maurice Obstfeld, 1992. "Risk-taking, global diversification, and growth," Discussion Paper / Institute for Empirical Macroeconomics 61, Federal Reserve Bank of Minneapolis.
- Maurice Obstfeld., 1993. "Risk-Taking, Global Diversification, and Growth," Center for International and Development Economics Research (CIDER) Working Papers C93-016, University of California at Berkeley.
- Maurice Obstfeld, 1992. "Risk-Taking, Global Diversification, and Growth," NBER Working Papers 4093, National Bureau of Economic Research, Inc.
- Raouf Boucekkine & Giorgio Fabbri & Patrick A. Pintus, 2012.
"Short-Run Pain, Long-Run Gain : the Conditional Welfare Gains from International Financial Integration,"
Documents de recherche
12-14, Centre d'Études des Politiques Économiques (EPEE), Université d'Evry Val d'Essonne.
- Raouf Boucekkine & Giorgio Fabbri & Patrick A. Pintus, 2014. "Short-Run Pain, Long-Run Gain: The Conditional Welfare Gains from International Financial Integration," Working Papers halshs-00790569, HAL.
- Philippe Weil, 1990. "Nonexpected Utility in Macroeconomics," The Quarterly Journal of Economics, Oxford University Press, vol. 105(1), pages 29-42.
- Raouf Boucekkine & Patrick Pintus, 2012.
"History’s a curse: leapfrogging, growth breaks and growth reversals under international borrowing without commitment,"
Journal of Economic Growth,
Springer, vol. 17(1), pages 27-47, March.
- BOUCEKKINE, Raouf & PINTUS, Patrick A., . "History's a curse: leapfrogging, growth breaks and growth reversals under international borrowing without commitment," CORE Discussion Papers RP 2450, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Kose, M. Ayhan & Prasad, Eswar S. & Taylor, Ashley D., 2009.
"Thresholds in the process of international financial integration,"
Policy Research Working Paper Series
5149, The World Bank.
- Ayhan Kose, M. & Prasad, Eswar S. & Taylor, Ashley D., 2011. "Thresholds in the process of international financial integration," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 147-179, February.
- Kose, M. Ayhan & Prasad, Eswar & Taylor, Ashley D., 2009. "Thresholds in the Process of International Financial Integration," IZA Discussion Papers 4133, Institute for the Study of Labor (IZA).
- M. Ayhan Kose & Eswar S. Prasad & Ashley D. Taylor, 2009. "Thresholds in the Process of International Financial Integration," NBER Working Papers 14916, National Bureau of Economic Research, Inc.
- Bekaert, Geert & Harvey, Campbell R. & Lundblad, Christian, 2006.
"Growth volatility and financial liberalization,"
Journal of International Money and Finance,
Elsevier, vol. 25(3), pages 370-403, April.
- Anne Epaulard & Aude Pommeret, 2005.
"Financial Integration, Growth, and Volatility,"
IMF Working Papers
05/67, International Monetary Fund.
- Anne Epaulard & Aude Pommeret, 2004. "Financial Integration, Growth, and Volatility," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 04.18, Université de Lausanne, Faculté des HEC, DEEP.
- Daniel Cohen & Jeffrey Sachs, 1991.
"Growth and External Debt Under Risk of Debt Repudiation,"
in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 437-472
National Bureau of Economic Research, Inc.
- Cohen, Daniel & Sachs, Jeffrey, 1986. "Growth and external debt under risk of debt repudiation," European Economic Review, Elsevier, vol. 30(3), pages 529-560, June.
- Daniel Cohen & Jeffrey Sachs, 1985. "Growth and External Debt Under Risk of Debt Repudiation," NBER Working Papers 1703, National Bureau of Economic Research, Inc.
- Steger, Thomas M., 2005. "Stochastic growth under Wiener and Poisson uncertainty," Economics Letters, Elsevier, vol. 86(3), pages 311-316, March.
When requesting a correction, please mention this item's handle: RePEc:aim:wpaimx:1347. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Yves Doazan)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.