Credit and Saving Constraints in General Equilibrium: A Quantitative Exploration

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

Working papers from Red Investigadores de Economía

Abstract: In this paper we build an incomplete-markets model with heterogeneous households and firms to study the aggregate effects of saving constraints and credit constraints in general equilibrium. We calibrate the model using survey data from Colombia, a developing country in which informal saving and credit frictions are pervasive. Our quantitative results suggest that reducing savings costs increases selection into formal saving, but the effect on aggregate outcomes and welfare is dwarfed by that of a policy which ameliorates borrowing constraints. Such a policy improves resource allocation and increases returns to capital and labor, resulting in higher savings and welfare gains for both households and firms.

Keywords: saving constraints; credit constraints; financial inclusion; misallocation; savings; 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: 41
Date: 2022-08
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-dge, nep-fdg, nep-fle and nep-iue
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Related works:
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 (2018)
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:rie:riecdt:92

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