Borrowing constraints, financial development and the aggregate savings: Theory and evidence

Pengfei Wang, Lifang Xu and Zhiwei Xu

Emerging Markets Review, 2025, vol. 66, issue C

Abstract: In most countries, both firms and households face borrowing constraints. Based on this fact, the paper builds a dynamic general equilibrium model with borrowing constraints on both households and firms. The model implies that the relationship between financial development and the saving rate is non-monotonic. The paper also provides some empirical evidence that supports this prediction. This non-monotonic relationship has several important implications.

Keywords: Borrowing constraints; Financial development; Saving rate (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:66:y:2025:i:c:s1566014125000317

DOI: 10.1016/j.ememar.2025.101282

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