Convergence, financial development, and policy analysis
Justin Yifu Lin (),
Jianjun Miao () and
Pengfei Wang ()
Additional contact information
Justin Yifu Lin: Peking University
Economic Theory, 2020, vol. 69, issue 3, No 1, 523-568
Abstract We study the relationship among inflation, economic growth, and financial development in a Schumpeterian overlapping generations model with credit constraints. In the baseline case, money is super-neutral. When the financial development exceeds some critical level, the economy catches up and then converges to the growth rate of the world technology frontier. Otherwise, the economy converges to a poverty trap with a growth rate lower than the frontier and with inflation decreasing with the level of financial development. We then study efficient allocation and identify the sources of inefficiency in a market equilibrium. We show that a particular combination of monetary and fiscal policies can make a market equilibrium attain the efficient allocation.
Keywords: Economic growth; Innovation; Credit constraints; Convergence; Policy analysis; Money; Inflation (search for similar items in EconPapers)
JEL-codes: O11 O23 O31 O33 O38 O42 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
http://link.springer.com/10.1007/s00199-019-01181-z Abstract (text/html)
Access to the full text of the articles in this series is restricted.
Working Paper: Convergence, Financial Development, and Policy Analysis (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:69:y:2020:i:3:d:10.1007_s00199-019-01181-z
Ordering information: This journal article can be ordered from
http://www.springer. ... eory/journal/199/PS2
Access Statistics for this article
Economic Theory is currently edited by Nichoals Yanneils
More articles in Economic Theory from Springer, Society for the Advancement of Economic Theory (SAET) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().