Financial Intermediation, Variability and the Development Process

Luis Carranza and Jose Enrique Galdon-Sanchez ()

STICERD - Development Economics Papers from Suntory and Toyota International Centres for Economics and Related Disciplines, LSE

Abstract: In this paper we have built a model of financial intermediation that explains the GDP variability pattern of an economy during the development process. In our model, per capita is more volatile in the 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 multiple 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.

Keywords: Externalities; market imperfections; growth; multiple equilibria; sunspot equilibria (search for similar items in EconPapers)
Date: 2000-03

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Related works:
Working Paper: Financial Intermediation, Variability and the Development Process (2002)
Journal Article: Financial intermediation, variability and the development process (2004)
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Persistent link: http://EconPapers.repec.org/RePEc:cep:stidep:21

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