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Credit and Saving Constraints in General Equilibrium: Evidence from Survey Data

Author

Listed:
  • Catalina Granda

    ()

  • Franz Hamann

    () (Banco de la República de Colombia)

  • Cesar E. Tamayo

    ()

Abstract

In this paper, we build a heterogeneous agents-dynamic general equilibrium model wherein saving constraints interact with credit constraints. Saving constraints in the form of fixed costs to use the financial system lead households to seek informal saving instruments (cash) and result in lower aggregate saving. Credit constraints induce misallocation of capital across producers that in turn lowers output, productivity, and the return to formal financial instruments. We calibrate the model using survey data from a developing country where informal saving and credit constraints are pervasive. Our quantitative results suggest that completely removing saving and credit constraints can have large effects on saving rates, output, TFP, and welfare. Moreover, we note that a sizable fraction of these gains can be more easily attained by a mix of moderate reforms that lower both types of frictions than by a strong reform on either front. Classification JEL: E21, E44, G21, O11, O16.

Suggested Citation

  • Catalina Granda & Franz Hamann & Cesar E. Tamayo, 2017. "Credit and Saving Constraints in General Equilibrium: Evidence from Survey Data," Borradores de Economia 1002, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:1002
    as

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    References listed on IDEAS

    as
    1. Franz Hamann & Luis-Fernando Mejía, 2011. "Formalizando la informalidad empresarial en Colombia," BORRADORES DE ECONOMIA 009078, BANCO DE LA REPÚBLICA.
    2. Francisco J. Buera & Joseph P. Kaboski & Yongseok Shin, 2011. "Finance and Development: A Tale of Two Sectors," American Economic Review, American Economic Association, vol. 101(5), pages 1964-2002, August.
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    6. Era Dabla-Norris & Yan Ji & Robert M. Townsend & Filiz D Unsal, 2015. "Identifying Constraints to Financial Inclusion and Their Impact on GDP and Inequality; A Structural Framework for Policy," IMF Working Papers 15/22, International Monetary Fund.
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    Full references (including those not matched with items on IDEAS)

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Credit and Saving Constraints in General Equilibrium: Evidence from Survey Data
      by Christian Zimmermann in NEP-DGE blog on 2017-06-14 23:48:52

    More about this item

    Keywords

    saving constraints; credit constraints; financial inclusion; misallocation; saving; formal and informal financial markets.;

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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