Finance and Economic Development in a Model with Credit Rationing
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Author/Creator
Author/Creator ORCID
Date
2013
Type of Work
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Citation of Original Publication
Arcand, Jean-Louis, Enrico Berkes, and Ugo Panizza. “Finance and Economic Development in a Model with Credit Rationing.” In The Social Value of the Financial Sector, Volume 29:67–80. World Scientific Studies in International Economics, Volume 29. WORLD SCIENTIFIC, 2013. https://doi.org/10.1142/9789814520294_0005.
Rights
Preprint of an article published in World Scientific Studies in International Economics, Volume 29, 2013, 67–80 https://doi.org/10.1142/9789814520294_0005 © 2023 World Scientific Publishing Co Pte Ltd https://www.worldscientific.com/worldscibooks/10.1142/8865
Subjects
Abstract
This paper develops a simple model with credit rationing and endogenous default risk in which the expectation of a bailout may lead to a financial sector which is too large with respect to the the social optimum. The paper concludes with a short discussion of how this model could be used as a building block for models aimed at endogenizing the probability of a bailout, and discussing the relationship between the size of the financial sector and economic growth in the presence of default risk.