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On Government Credit Programs

Marco Espinosa-Vega (), Bruce Smith and Chong Yip

No 351, Computing in Economics and Finance 1999 from Society for Computational Economics

Abstract: Credit Rationing is a common feature of most developing economies. In response to it, the governments of these countries often operate extensive credit programs and lend, either directly or indirectly, to the private sector. We analyze the macroeconomic consequences of a typical government credit program in a small open economy. We show that such programs increase long-run production if the economy is in a development trap and that such programs often lead to endogenously-arising aggregate volatility. On the other hand, they may eliminate certain indeterminacies created by endogenous credit market frictions.

New Economics Papers: this item is included in nep-pke
Date: 1999-03-01
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More papers in Computing in Economics and Finance 1999 from Society for Computational Economics CEF99, Boston College, Department of Economics, Chestnut Hill MA 02467 USA. Contact information at EDIRC.
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