Informality, financial development and macroeconomic volatility

Shalini Mitra

Economics Letters, 2013, vol. 120, issue 3, 454-457

Abstract: In a dynamic stochastic general equilibrium model with heterogeneous agents, this note shows that beyond a certain low level, financial development is associated with higher relative consumption–income volatility in the presence of a working capital constraint. Informality on the other hand lowers relative consumption volatility by weakening the working capital requirement channel of financial development.

Keywords: Informality; Tax evasion; Heterogeneous firms; Borrowing constraints; Consumption volatility; Working capital (search for similar items in EconPapers)
JEL-codes: E26 E32 H26 O17 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:120:y:2013:i:3:p:454-457

DOI: 10.1016/j.econlet.2013.05.028

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