Asset pooling, credit rationing, and growth

No 1998-52, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: I study the effect of improved financial intermediation on the process of capital accumulation by augmenting a standard model with a general contract space. With the extra contracts, intermediaries endogenously begin using ROSCAs, or Rotating Savings and Credit Associations. These contracts allow poor agents, previously credit rationed, access to credit. As a result, agents work harder and total economy-wide output increases; however, these gains come at the cost of increased inequality. I provide sufficient conditions for the allocations to be Pareto optimal, and for there to be a unique invariant distribution of wealth. I provide an analytic characterization of a simple model and use numerical techniques to study more general models.

Keywords: Financial markets; Credit (search for similar items in EconPapers)
Date: 1998
References: Add references at CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
http://www.federalreserve.gov/pubs/feds/1998/199852/199852abs.html (text/html)
http://www.federalreserve.gov/pubs/feds/1998/199852/199852pap.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:1998-52

Access Statistics for this paper

More papers in Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().