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

Catalina Granda-Carvajal (), Franz Hamann and Cesar Tamayo

Borradores de Economia from Banco de la Republica de Colombia

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.

Keywords: saving constraints; credit constraints; financial inclusion; misallocation; saving; formal and informal financial markets. (search for similar items in EconPapers)
JEL-codes: E21 E44 G21 O11 O16 (search for similar items in EconPapers)
Pages: 27
Date: 2017-06
New Economics Papers: this item is included in nep-dge and nep-iue
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://doi.org/10.32468/be.1002 (application/pdf)

Related works:
Working Paper: Credit and Saving Constraints in General Equilibrium: A Quantitative Exploration (2022)
Journal Article: Credit and saving constraints in general equilibrium: A quantitative exploration (2019)
Working Paper: Credit and Saving Constraints in General Equilibrium: Evidence from Survey Data (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:1002

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