We build an expanding variety endogenous growth model with search frictions in financial markets. We show that the rate of growth declines with the extent of frictions. We also show that, as frictions gain momentum, the rate of growth becomes more sensitive to exogenous variations in innovation incentives. Thus, the paper provides a rationale for the large growth differentials that characterise countries with inefficient financial markets.
Growth and Financial Frictions
Piccirilli G
2013-01-01
Abstract
We build an expanding variety endogenous growth model with search frictions in financial markets. We show that the rate of growth declines with the extent of frictions. We also show that, as frictions gain momentum, the rate of growth becomes more sensitive to exogenous variations in innovation incentives. Thus, the paper provides a rationale for the large growth differentials that characterise countries with inefficient financial markets.File in questo prodotto:
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