On government credit programs

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

No 98-2, FRB Atlanta 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)
Date: 1998
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Working Paper: On Government Credit Programs (1999)
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