Threshold Effect and Financial Intermediation in Economic Development

Wahyoe Soedarmono and Laurent Augier

MPRA Paper from University Library of Munich, Germany

Abstract: This paper analyzes the importance of financial intermediation on economic growth. Using the Neoclassical growth framework, we raise a new issue where our model has multiple stationary states with threshold effect. We further confirm that financial intermediation is better than self-financing system in order to ensure the existence and uniqueness of long-run steady state equilibrium of capital stock, as well as to decrease threshold level. The presence of threshold effect is an important finding in studying the finance-growth nexus, since it prevents the economy to raise sufficient initial capital.

Keywords: Threshold Effect; Financial Intermediation; Economic Growth; Developing Countries (search for similar items in EconPapers)
JEL-codes: C61 C62 O16 (search for similar items in EconPapers)
Date: 2009-04-28
New Economics Papers: this item is included in nep-dev and nep-fdg
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https://mpra.ub.uni-muenchen.de/14905/1/MPRA_paper_14905.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/20405/1/MPRA_paper_20405.pdf revised version (application/pdf)

Related works:
Working Paper: Threshold Effect and Financial Intermediation in Economic Development (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:14905

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