Minimum investment requirement, financial market imperfection and self-fulfilling belief

Tomoo Kikuchi () and George Vachadze
Additional contact information
Tomoo Kikuchi: National University of Singapore

Journal of Evolutionary Economics, 2018, vol. 28, issue 2, No 6, 305-332

Abstract: Abstract We develop a model in which a strategic complementarity in saving decisions arises due to a minimum investment requirement and financial market imperfection. We explore the role of self-fulling beliefs in determining the long run dynamics. The model exhibits a wide range of dynamic phenomena such as a poverty trap, a big push and a sunspot equilibrium, depending on the level of financial market imperfection. They account for excessive volatility and a sudden change in the saving rate and its macroeconomic consequences without any shocks to fundamentals.

Keywords: Financial market imperfection; Strategic complementarity; Saving rate; Self-fulfilling belief; Sunspot; multiple equilibria (search for similar items in EconPapers)
JEL-codes: D91 E21 E32 E44 O11 O16 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://link.springer.com/10.1007/s00191-017-0510-z Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:joevec:v:28:y:2018:i:2:d:10.1007_s00191-017-0510-z

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/191/PS2

DOI: 10.1007/s00191-017-0510-z

Access Statistics for this article

Journal of Evolutionary Economics is currently edited by Uwe Cantner, Elias Dinopoulos, Horst Hanusch and Luigi Orsenigo

More articles in Journal of Evolutionary Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().