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Creator: Boyd, John H. and Smith, Bruce D. (Bruce David), 1954-2002 Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 522 Abstract:
We consider a two country growth model with international capital markets. These markets fund capital investment in both countries, and operate subject to a costly state verification (CSV) problem. Investors in each country require some external finance, but also provide internal finance, which mitigates the CSV problem. When two identical (except for their initial capital stocks) economies are closed, they necessarily converge monotonically to the same steady state output level. Unrestricted international financial trade precludes otherwise identical economies from converging, and poor countries are necessarily net lenders to rich countries. Oscillation in real activity and international capital flows can occur.
Mot-clé: CSV, Open economy, International lending, Costly state verification, Capital investment, Closed economy, Credit rationing, International capital markets, and Credit Assujettir: F34 - International Lending and Debt Problems and O16 - Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
Creator: Greenwood, Jeremy, 1953- and Jovanovic, Boyan, 1951- Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 446 Abstract:
A paradigm is presented where both the extent of financial intermediation and the rate of economic growth are endogenously determined. Financial intermediation promotes growth because it allows a higher rate of return to be earned on capital, and growth in turn provides the means to implement costly financial structures. Thus, financial intermediation and economic growth are inextricably linked in accord with the Goldsmith-McKinnon-Shaw view on economic development. The model also generates a development cycle reminiscent of the Kuznets hypothesis. In particular, in the transition from a primitive slow-growing economy to a developed fast-growing one, a nation passes through a stage where the distribution of wealth across the rich and poor widens.
Mot-clé: Kuznets curve, Rate of return, Income gap, Income distribution, Growth rate, and Financial intermediation Assujettir: G00 - Financial Economics: General and O11 - Macroeconomic Analyses of Economic Development
Creator: Williamson, Stephen D. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 405 Abstract:
A model is constructed where banks provide access to a communication technology which facilitates trade. Bank liabilities may coexist with alternative means of payment in equilibrium, and there exist regions of the parameter space where banking dominates the payments system and where physical exchange media dominate. The model is consistent with some observations concerning the role of the banking system in economic development, and with characteristics of banking crises. In particular, in early stages of economic development: 1) rapid output growth is accompanied by an increasing share of banking in transactions activity and 2) there are recurrent banking "panics" where reductions in measured aggregate output coincide with increases in the use of alternative means of payment relative to bank liabilities. In later stages of development, growth slackens off, the share of banking in the payments system stabilizes and the economy is less likely to be subject to banking panics.
Mot-clé: Financial panic, Banks, Banking panics, Communication cost, and Communication technology Assujettir: G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages and O33 - Technological Change: Choices and Consequences; Diffusion Processes
Creator: Lin, Lizbie Gee-Sun Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 000 La description:
This paper was published with no issue number.
Simultaneously published as part of the Ninth District Economic Information Series.
Mot-clé: Technical colleges, Community colleges, Students, and Colleges and universities Assujettir: R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes, H52 - National Government Expenditures and Education, and I22 - Educational Finance; Financial Aid
Creator: Gertler, Mark and Rogoff, Kenneth S. Series: International perspectives on debt, growth, and business cycles Abstract:
Across developing countries, capital market inefficiencies tend to decrease and external borrowing tends to sharply increase as national wealth rises. We construct a simple model of intertemporal trade under asymmetric information which provides a coherent explanation of both these phenomenon, without appealing to imperfect capital mobility. The model can be applied to a number of policy issues in LDC lending, including the debt overhang problem, and the impact of government guarantees of private debt to foreign creditors. In the two-country general equilibrium version of the model, an increase in wealth in the rich country can induce a decline in investment in the poor country via a "siphoning effect". Finally, we present some new empirical evidence regarding the link between LDC borrowing and per capita income.
Assujettir: F43 - Economic Growth of Open Economies and O11 - Macroeconomic Analyses of Economic Development
Creator: Krusell, Per and Ríos-Rull, José-Víctor Series: Conference on economics and politics Abstract:
Some economic policies and regulations seem to have only one purpose: to prevent technological development and economic growth from occurring. In this paper, we attempt to rationalize such policies as outcomes of voting equilibria. In our environment, some agents will be worse off if the economy grows, since their skills are complementary to resources that can be allocated to growth-stimulating activities. In the absence of arrangements where votes are traded, we show that for some initial skill distributions, the economy may stagnate due to growth-preventing policies. Different initial skill distributions, however, lead to voting outcomes and policies in support of technological development, and to persistent economic growth. In making our argument formally, we use a dynamic model with induced heterogeneity in agents' skills. In their voting decisions, agents compare how they will be affected under each policy alternative, and then vote for the policy that maximizes their welfare.
Assujettir: O41 - One, Two, and Multisector Growth Models and O31 - Innovation and Invention: Processes and Incentives
Creator: Backus, David, Kehoe, Patrick J., and Kehoe, Timothy Jerome, 1953- Series: Modeling North American economic integration Abstract:
We look for the scale effects on growth predicted by some theories of trade and growth based on dynamic returns to scale at the national or industry level. The increasing returns can arise from learning by doing, investment in human capital, research and development, or development of new products. We find some evidence of a relation between growth rates and the measures of scale implied by the learning by doing theory, especially total manufacturing. With respect to human capital, there is some evidence of a relation between growth rates and per capita measures of inputs into the human capital accumulation process, but little evidence of a relation with the scale of inputs. There is also little evidence that growth rates are related to measures of inputs into R&D. We find, however, that growth rates are related to measures of intra-industry trade, particularly when we control for scale of industry.
Mot-clé: External effects, Intra-industry trade, Specialization indexes, Increasing returns to scale, Learning by doing, Research and development, Human capital, and International trade Assujettir: F43 - Economic Growth of Open Economies and O41 - One, Two, and Multisector Growth Models
Creator: Backus, David and Kehoe, Patrick J. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Department) Number: 318 Abstract:
These notes are intended as a do-it-yourself course in economic growth along lines suggested by Lucas ("On the Mechanics of Economic Development"). We examine in turn the neoclassical growth model; theories of endogenous growth, including learning-by-doing, increasing returns to scale, and externalities; and dynamic comparative advantage in trade. Salient features of growing economies and microeconomic evidence on production processes are used to evaluate alternatives. Exercises supplement the text.
Mot-clé: Technical change, Neoclassical growth, Dynamic comparative advantage, Learning-by-doing, and Returns to scale Assujettir: F11 - Neoclassical Models of Trade, O33 - Technological Change: Choices and Consequences; Diffusion Processes, and O42 - Monetary Growth Models