 Endogenous growth cycles with financial intermediaries and entrepreneurial innovationMiho Sunaga Journal of Macroeconomics, 2017, vol. 53, issue C, 191-206 Abstract: This study analyzes the effects of financial intermediaries’ activities on economic fluctuations in a model of endogenous innovation cycles. In the model, I consider an economy in which entrepreneurs and financial intermediaries engage in their respective innovative activities. Entrepreneurs can invent new products and raise funds for their invention from financial intermediaries and if their invention is successful, they can produce new products. Only financial intermediaries can evaluate entrepreneurial ideas regarding their new products. Moreover, they can invest their capital to improve information about the entrepreneurial ideas and thus, meet successful entrepreneurs with a higher probability. I show that when an economy does not accumulate enough capital, and the level of financial innovation is not sufficiently high, the economy is trapped in a no-entrepreneurial innovation regime. I also show that when the financial innovation slightly develops, the economy fluctuates between the no-entrepreneurial innovation and entrepreneurial innovation regimes. Keywords: Economic fluctuation; Endogenous growth cycles; Financial innovation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:53:y:2017:i:c:p:191-206 DOI: 10.1016/j.jmacro.2017.07.001 Access Statistics for this article Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos More articles in Journal of Macroeconomics from Elsevier |
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