LSE LSE Research Laboratory LSE
LSE Research Laboratory (RLAB)

Abstract for:

Financial Intermediation, Variability and the Development Process

Luis  Carranza,  Jose E.  Galdon-Sanchez,  March 2000
Paper No' DEDPS 21: | Full paper (pdf)
Save Reference as: BibTeX BibTeX File | Endote EndNote Import File
Keywords: Externalities; market imperfections, growth, multiple equilibria, sunspot equilibria

JEL Classification:

Is hard copy/paper copy available? YES - Paper Copy Still In Print.
This Paper is published under the following series: Development Economics
Share this page: Google Bookmarks Google Bookmarks | Facebook Facebook | Twitter Twitter

Abstract:

In this paper we have built a model of financial intermediation that explains the GDP variability pattern of an economy during the development process. In our model, per capita is more volatile in the middle-income economies than in both low and high-income economies. We show that, if the model economy is in the early or in the mature stages of development there is a unique equilibrium. However, in the middle stages of development multiple equilibria arise. Moreover, we find that in economies with imperfect credit markets, per capita output volatility tends to be higher than in economies with perfect or non-existent credit markets.