Long-Term Financial Contracts and Technological Choice

Spiros Bougheas

Bulletin of Economic Research, 1998, vol. 50, issue 1, 61-71

Abstract: The paper establishes a theoretical link between financial innovation and economic development. In an economic environment where product development takes place, it is shown that the gains from long-term financial contracting go beyond the minimization of costs associated with frictions in the capital markets. They can also result in the adoption of more efficient technologies by the production sector. Furthermore, the model suggests that financial innovation is also a byproduct of economic development, providing a possible explanation for the lack of long-term financial markets in less-developed economies. Copyright 1998 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:bla:buecrs:v:50:y:1998:i:1:p:61-71

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