Credit Markets and Stagnation in an Endogenous Growth Model

Author/Editor:

Jose De Gregorio

Publication Date:

September 1, 1993

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper studies the effects that the inability of individuals to borrow against future income has on economic growth. The model assumes that human capital, which is accumulated through education, is the only factor of production. It is shown that liquidity constraints reduce growth. Further, in the presence of externalities that may induce two equilibria, it is shown that liquidity constraints not only reduce the rate of growth in the high-growth equilibrium, but can also make the low-growth equilibrium more likely to occur.

Series:

Working Paper No. 1993/072

Subject:

Capital accumulation Education Human capital Income Liquidity

English

Publication Date:

September 1, 1993

ISBN/ISSN:

9781451959086/1018-5941

Stock No:

WPIEA0721993

Pages:

22

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