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Capital Market Imperfection and Economic Growth

Author

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  • Oyama, Masako

Abstract

This paper explains adverse international capital flows and economic growth using a model with asymmetric information in the capital market. The capital markets in developing countries are found to suffer more severely from asymmetric information than those in developed ones, which results in a lower rate of return on investment and severer credit rationing. Thus, capital flows from developing to developed countries, lowering the growth rate of the developing countries.

Suggested Citation

  • Oyama, Masako, 2002. "Capital Market Imperfection and Economic Growth," Discussion Paper 105, Center for Intergenerational Studies, Institute of Economic Research, Hitotsubashi University.
  • Handle: RePEc:hit:piedp1:105
    as

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/14427/1/pie_dp105.pdf
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    References listed on IDEAS

    as
    1. Xavier Sala-i-Martin, 1990. "Lecture Notes on Economic Growth(II): Five Prototype Models of Endogenous Growth," NBER Working Papers 3564, National Bureau of Economic Research, Inc.
    2. Xavier Sala-i-Martin, 1990. "Lecture Notes on Economic Growth(I): Introduction to the Literature and Neoclassical Models," NBER Working Papers 3563, National Bureau of Economic Research, Inc.
    3. Ernst-Ludwig von Thadden, 1995. "Long-Term Contracts, Short-Term Investment and Monitoring," Review of Economic Studies, Oxford University Press, vol. 62(4), pages 557-575.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    economic growth; capital flows; asymmetric information; credit rationing; development;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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