On government credit programs

Marco Espinosa-Vega (), Bruce D. Smith and Chong K. Yip

No 98-2, Working Paper from Federal Reserve Bank of Atlanta

Abstract: Credit rationing is a common feature of most developing economies. In response to it, the governments of these countries often operate extensive credit programs and lend, either directly or indirectly, to the private sector. We analyze the macroeconomic consequences of a typical government credit program in a small open economy. We show that such programs increase long-run production if the economy is in a development trap and that such programs often lead to endogenously arising aggregate volatility. On the other hand, they may eliminate certain indeterminacies created by endogenous credit market frictions.

Keywords: Banks and banking, Central; Credit; Productivity (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pbe and nep-pub
Date: 1998
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Working Paper: On Government Credit Programs (1999)
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