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Banking, Credit Market Imperfection and Economic Growth

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  • Mahmoud Sami Nabi

    () (LEGI, Tunisia Polytechnic School and University of Sousse)

  • Taoufik Rajhi

Abstract

We develop a new model that links capital market imperfection to banking emergence and economic growth. It is shown that the banking system emerges endogenously after a first stage of slow economic growth. Interestingly, economic growth increases after the emergence of banking but remains under its potential level. This is due to a credit rationing brake which decreases progressively as the economy develops. Another finding is that a reduction of credit market imperfection reduces the credit rationing stage.

Suggested Citation

  • Mahmoud Sami Nabi & Taoufik Rajhi, 2010. "Banking, Credit Market Imperfection and Economic Growth," Working Papers 540, Economic Research Forum, revised 09 Jan 2010.
  • Handle: RePEc:erg:wpaper:540
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    References listed on IDEAS

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