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Financial Intermediation, Variability and the Development Process

  • Luis Carranza

    ()

  • José E. Galdón-Sánchez

    ()

    (Public University of Navarra)

In this paper we build a model of financial intermediation that explains the GDP variability pattern of an economy during the development process. We find evidence that per capita output is more volatile in middle-income economies than in both low and high-income economies. We show that, if the model economy is in the early or in the mature stages of development, there is a unique equilibrium. However, in the middle stages of development, multi-ple equilibria arise. Moreover, we find that in economies with imperfect credit markets, per capita output volatility tends to be higher than in economies with perfect or non-existent credit markets.

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File URL: http://www.unav.es/facultad/econom/files/workingpapersmodule/@random434f952645304/1132240299_wp0402.pdf
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Paper provided by School of Economics and Business Administration, University of Navarra in its series Faculty Working Papers with number 04/02.

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Length: 45 pages pages
Date of creation: Jun 2002
Date of revision:
Publication status: Published, Journal of Development Economics, 2004, vol. 73 (1), pp. 27-54
Handle: RePEc:una:unccee:wp0402
Contact details of provider: Web page: http://www.unav.es/facultad/econom

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