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The Effects of Households’ and Firms’ Borrowing Constraints on Economic Growth

Pereira, Maria da Conceição Costa
Fonte: FEUC. Grupo de Estudos Monetários e Financeiros Publicador: FEUC. Grupo de Estudos Monetários e Financeiros
Tipo: Trabalho em Andamento
Português
Relevância na Pesquisa
46.45%
This paper considers an endogenous growth model with asymmetric information between lenders and borrowers, that leads to credit-rationing a proportion of borrowers. However, in contrast to the existing literature, both firms and consumers in this model face borrowing constraints. Nonetheless, the borrowing constraints facing a firm and those encountered by a consumer have opposing effects on growth. Relaxing borrowing constraints on firms is growth-promoting as more funds become available for productive investment. In contrast, relaxing borrowing constraints facing consumers has a detrimental effect as funds are diverted from productive investment to consumption. Such an adverse effect offsets the externality effect present in the production function that would otherwise ensure perpetual growth. Furthermore, it is shown that the interaction between households’ and firms’ borrowing constraints may give rise to endogenous cycles.; Este artigo considera um modelo de crescimento endógeno com informação assimétrica entre credores e devedores, a qual conduz a racionar o crédito a uma parte dos devedores. No entanto, em contraste com a literatura existente, tanto as empresas como as famílias enfrentam restrições ao crédito. De qualquer forma...

Wealth composition, endogenous fertility and the dynamics of income inequality

Veloso, Fernando A.
Fonte: Escola de Pós-Graduação em Economia da FGV Publicador: Escola de Pós-Graduação em Economia da FGV
Tipo: Trabalho em Andamento
Português
Relevância na Pesquisa
36.02%
This paper analyzes how differences in the composition of wealth between human and physical capital among families affect fertility choices. These in tum influence the dynamics of wealth and income inequality across generations through a tradeoffbetween quantity and quality of children. Wealth composition affects fertility because physical capital has only a wealth effect on number of children, whereas human capital increases the time cost of child-rearing in addition to the wealth effect. I construct a model combining endogenous fertility with borrowing constraints in human capital investments, in which weaIth composition is determined endogenously. The model is calibrated to the PNAD, a Brazilian household survey, and the main findings of the paper can be summarized as follows. First, the model implies that the crosssection relationship between fertility and wealth typically displays a U-shaped pattem, reflecting differences in wealth composition between poor and rich families. Also, the quantity-quality tradeoff implies a concave cross-section relationship between investments per child and wealth. Second, as the economy develops and families overcome their bOlTowing constraints, the negative effect of weaIth on fertility becomes smaller...

On the Individual Optimality of Economic Integration

CASTRO, Rui; KOUMTINGUÉ, Nelnan
Fonte: Université de Montréal Publicador: Université de Montréal
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
35.85%
Which countries find it optimal to form an economic union? We emphasize the risk-sharing benefits of economic integration. We consider an endowment world economy model, where international financial markets are incomplete and contracts not enforceable. A union solves both frictions among member countries. We uncover conditions on initial incomes and net foreign assets of potential union members such that forming a union is welfare-improving over standing alone in the world economy. Consistently with evidence on economic integration, unions in our model occur (i) relatively infrequently, and (ii) emerge more likely among homogeneous countries,and (iii) rich countries.

On the individual optimality of economic integration

Castro, Rui; Koumtingué, Nelnan
Fonte: Université de Montréal Publicador: Université de Montréal
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
35.85%
Which countries find it optimal to form an economic union? We emphasize the risk-sharing benefits of economic integration. Consider an endowment world economy model, where international financial markets are incomplete and contracts not enforceable. A union solves both frictions among member countries. We uncover conditions on initial incomes and net foreign assets of potential union members such that forming a union is welfare-improving over standing alone in the world economy. Consistently with evidence on economic integration, unions in our model occur (i) relatively infrequently, and (ii) emerge more likely among homogeneous countries, and (iii) rich countries.

Trade and Financial Sector Reforms : Interactions and Spillovers

Taylor, Ashley
Fonte: Banco Mundial Publicador: Banco Mundial
Português
Relevância na Pesquisa
26.24%
The allocation of production across firms is a potentially important explanation of the productivity gap between rich and poor economies. Reforms to trade policy and the domestic financial sector are often both key elements of policy packages aimed at reducing productive distortions. However, the impact of each reform in reallocating production within an economy is usually analyzed independently. This paper asks how do such general equilibrium effects of trade and domestic financial sector reforms interact in terms of their effects on productivity, wages and utility. Motivated by recent firm-level studies, I add two-way linkages between firms production and exporting decisions and their financial constraints to a general equilibrium heterogeneous firm trade model. The interaction effects between reforms appear qualitatively important. Trade and domestic financial sector reforms have complementary effects on the average productivity and size of domestic producers. However, if much reallocative work has already been done through a well-functioning financial sector...

Consumption Risk, Technology Adoption, and Poverty Traps : Evidence from Ethiopia

Dercon, Stefan; Christiaensen, Luc
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Português
Relevância na Pesquisa
26.01%
Much has been written on the determinants of input and technology adoption in agriculture, with issues such as input availability, knowledge and education, risk preferences, profitability, and credit constraints receiving much attention. This paper focuses on a factor that has been less well documented-the differential ability of households to take on risky production technologies for fear of the welfare consequences if shocks result in poor harvests. Building on an explicit model, this is explored in panel data for Ethiopia. Historical rainfall distributions are used to identify the counterfactual consumption risk. Controlling for unobserved household and time-varying village characteristics, it emerges that not just ex-ante credit constraints, but also the possibly low consumption outcomes when harvests fail, discourage the application of fertilizer. The lack of insurance causes inefficiency in production choices.

Excessive Financial Intermediation in a Model with Endogenous Liquidity

Eden, Maya
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Português
Relevância na Pesquisa
35.99%
Does an unregulated financial system absorb too many productive inputs? This paper studies this question in the context of a dynamic model with heterogeneous producers. In the absence of a financial system, the only way to purchase inputs is using internal funds. Producers are subject to idiosyncratic productivity shocks, and will decide to produce only if their productivity is high enough. Otherwise, they will hold money. A financial intermediation technology allows producers to purchase inputs in excess of their internal funds, by borrowing from unproductive agents. However, intermediation requires the use of costly monitoring services. In equilibrium, intermediation increases the money in circulation and raises nominal prices, thereby reducing the value of internal funds and making producers increasingly reliant on costly monitoring services. For this reason, society is better off when intermediation is restricted.

A Retrospective Analysis of the House Prices Macro-Relationship in the United States

Ahamada, Ibrahim; Diaz Sanchez, Jose Luis
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Português
Relevância na Pesquisa
26.08%
This study provides empirical evidence on the strengthening of the impact of house prices on the US macroeconomy. The stability of the house prices macro-link is tested in a small-dimensional vector autoregressive model over the last fifty years. The estimated break-points are used to split the sample into different segments and a multivariate time series analysis is performed within subsamples. The paper finds a robust structural break in the mid-1980s. In addition, time series analysis across segments provides evidence that the effect of house prices, not only on private consumption, but also on economic activity, has intensified since the mid-1980s.

Access to Finance, Product Innovation and Middle-Income Traps

Agénor, Pierre-Richard; Canuto, Otaviano
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Português
Relevância na Pesquisa
26.04%
This paper studies interactions between access to finance, product innovation, and labor supply in a two-period overlapping generations model with an endogenous skill distribution and credit market frictions. In the model lack of access to finance (induced by high monitoring costs) has an adverse effect on innovation activity not only directly but also indirectly, because too few individuals may choose to invest in skills. If monitoring costs fall with the number of successful projects, multiple equilibria may emerge, one of which, a middle-income trap, characterized by low wages in the design sector, a low share of the labor force engaged in innovation activity, and low growth. A sufficiently ambitious policy aimed at alleviating constraints on access to finance by innovators may allow a country to move away from such a trap by promoting the production of ideas and improving incentives to invest in skills.

Credit Constraints, Agricultural Productivity, and Rural Nonfarm Participation : Evidence from Rwanda

Ali, Daniel Ayalew; Deininger, Klaus; Duponchel, Marguerite
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Português
Relevância na Pesquisa
46.18%
Although the potentially negative impacts of credit constraints on economic development have long been discussed conceptually, empirical evidence for Africa remains limited. This study uses a direct elicitation approach for a national sample of Rwandan rural households to assess empirically the extent and nature of credit rationing in the semi-formal sector and its impact using an endogenous sample separation between credit-constrained and unconstrained households. Being credit constrained reduces the likelihood of participating in off-farm self-employment activities by about 6.3 percent while making participation in low-return farm wage labor more likely. Even within agriculture, elimination of all types of credit constraints in the semi-formal sector could increase output by some 17 percent. Two suggestions for policy emerge from the findings. First, the estimates suggest that access to information (education, listening to the radio, and membership in a farm cooperative) has a major impact on reducing the incidence of credit constraints in the semi-formal credit sector. Expanding access to information in rural areas thus seems to be one of the most promising strategies to improve credit access in the short term. Second...

Business Cycles, Economic Crises, and the Poor : Testing for Asymmetric Effects

Agenor, Pierre-Richard
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Português
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35.93%
The author examines whether output contraction associated with cyclical output fluctuations and economic crises have an asymmetric effect on poverty. He identifies four potential sources of asymmetry: expectations and cofident factors, credit rationing at the firm level (induced by either adeverse selection problems or negative shocks to net worth), borrowing constraints at the household level, and the "labor hoarding" hypothesis. He also identifies some testable implications of these alternative explanations. The author then proposes a vector autoregression technique (involving the detrended components of real output, the unemployment rate, real wages, and the poverty rate) to test whether the initial cyclical position of the economy, and the size of the initial drop in the output gap in a downturn, matter in assessing the extent to which output shocks affect poverty. He applies the technique to Brazil, using annual data for 1981-99. The results indicate that poverty responds asymmetrically to output shocks...

Endogenous Trading Constraints with Incomplete Asset Markets

ABRAHAM, Arpad; CARCELES-POVEDA, Eva
Fonte: Instituto Universitário Europeu Publicador: Instituto Universitário Europeu
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
46.02%
This paper endogenizes the borrowing constraints on capital in a production economy with incomplete markets. We find that these limits get looser with income, a property that is consistent with US data on credit limits. The framework with endogenous limits is then used to study the effects of a revenue neutral tax reform that eliminates capital income taxes. Our results illustrate that it is very important to take into account the effects of tax policies on the limits. Throughout the transition, these effects can be big enough to change the overall conclusion about the desirability of a tax reform.; Available online 13 October 2009

Essays on heterogeneous agent models

Rachedi, Omar
Fonte: Universidade Carlos III de Madrid Publicador: Universidade Carlos III de Madrid
Tipo: Tese de Doutorado
Português
Relevância na Pesquisa
25.99%
There is a continued interest among economists on the interconnections between financial markets, credit markets and the real economy. The three main chapters of this dissertation contribute to the understanding of how financial and credit frictions - either at the fi rm or household level - can aff ect the real economy, and even trigger a financial crisis. Chapter 1 studies the causes of fi nancial crises. I show that shocks to the volatility of total factor productivity (TFP) can generate endogenous variations in loan-to-value (LTV) ratios and trigger credit crunches, without appealing to fi nancial shocks. Using a panel of countries, I find that nancial crises coincide with the reversal of a long period of low volatility of TFP. To explain this new fact, I develop a general equilibrium model in which volatility shocks to TFP interact with an occasionally binding borrowing constraint and housing serves as collateral. I introduce search frictions in the housing market to capture the liquidity of housing and endogenize the LTV ratio: households borrow at higher LTV ratios when the collateral is more liquid. In this environment, volatility shocks cause financial crises by changing the liquidity of the collateral. In a quantitative exercise...

Does Financial Liberalization Relax Financing Constraints on Firms?

Laeven, Luc
Fonte: World Bank, Washington, DC Publicador: World Bank, Washington, DC
Tipo: Publications & Research :: Policy Research Working Paper; Publications & Research
Português
Relevância na Pesquisa
46.26%
The author uses panel data on 394 firms in 13 developing countries for the years 1988-98 to learn whether financial liberalization relaxes financing constraints on firms. He finds that liberalization affects small and large firms differently. Small firms are financially constrained before liberalization begins but become less so after liberalization. The financing constraints on large firms, however, are low both before and after liberalization. The initial difference between small and large firms disappears over time. The author hypothesizes that financial liberalization has little effect on the financing constraints of large firms because they have better access to preferential directed credit in the period before liberalization. Financial liberalization also reduces imperfections in financial markets, especially the asymmetric information costs of firms' financial leverage. Countries that liberalize their financial sectors tend to see dramatic improvements in political climate as well. Successful financial liberalization seems to require both the political will and the ability to stop the preferential treatment of well-connected...

Essays in open economy macroeconomics with borrowing frictions

Koumtingue, Nelnan F.
Fonte: Université de Montréal Publicador: Université de Montréal
Tipo: Thèse ou Mémoire numérique / Electronic Thesis or Dissertation
Português
Relevância na Pesquisa
56.14%
Cette thèse comporte trois essais en macroéconomie en économie ouverte et commerce international. Je considère tour à tour les questions suivantes: sous quelles conditions est-il optimal pour un pays de former une union économique? (essai 1); l'augmentation de la dispersion transversale des avoirs extérieurs nets des pays est-elle compatible avec une dispersion relativement stable des taux d'investissement? (essai 2); le risque de perte de marché à l'exportation du fait de l'existence des zones de commerce préférentiel joue t-il un rôle dans la décision des pays exclus de négocier des accords commerciaux à leur tour? (essai 3). Le premier essai examine les conditions d'optimalité d'une union économique. Il s'intéresse à une motivation particulière: le partage du risque lié aux fluctuations du revenu. Dans la situation initiale, les pays ont très peu d'opportunités pour partager le risque à cause des frictions: les marchés financiers internationaux sont incomplets et il n'y pas de mécanisme pour faire respecter les contrats de crédit entre pays. Dans ce contexte, une union économique apparait comme un arrangement qui pallie à ces frictions entre les pays membres seulement. Cependant, l'union dans son ensemble continue de faire face à ces frictions lorsqu'elle échange avec le reste du monde. L'arbitrage clé dans le modèle est le suivant. D'un coté...

Endogenous borrowing constraints and default when markets are incomplete

Braido, Luís H. B.
Fonte: Escola de Pós-Graduação em Economia da FGV Publicador: Escola de Pós-Graduação em Economia da FGV
Tipo: Trabalho em Andamento
Português
Relevância na Pesquisa
66.32%
Incomplete markets and non-default borrowing constraints increase the volatility of pricing kernels and are helpful when addressing assetpricing puzzles. However, ruling out default when markets are in complete is suboptimal. This paper endogenizes borrowing constraints as an intertemporal incentive structure to default. It mo deIs an infinitehorizon economy, where agents are allowed not to pay their liabilities and face borrowing constraints that depend on the individual history of default. Those constraints trade off the economy's risk-sharing possibilities and incentives to prevent default. The equilibrium presents stationary properties, such as an invariant distribution for the assets' solvency rate.

Endogenous debt constraints in collateralized economies with default penalties

Martins-da-Rocha, Victor Filipe; Vailakis, Y.
Fonte: Escola de Pós-Graduação em Economia da FGV Publicador: Escola de Pós-Graduação em Economia da FGV
Tipo: Relatório
Português
Relevância na Pesquisa
66.2%
In infinite horizon financial markets economies, competitive equilibria fail to exist if one does not impose restrictions on agents' trades that rule out Ponzi schemes. When there is limited commitment and collateral repossession is the unique default punishment, Araujo, Páscoa and Torres-Martínez (2002) proved that Ponzi schemes are ruled out without imposing any exogenous/endogenous debt constraints on agents' trades. Recently Páscoa and Seghir (2009) have shown that this positive result is not robust to the presence of additional default punishments. They provide several examples showing that, in the absence of debt constraints, harsh default penalties may induce agents to run Ponzi schemes that jeopardize equilibrium existence. The objective of this paper is to close a theoretical gap in the literature by identifying endogenous borrowing constraints that rule out Ponzi schemes and ensure existence of equilibria in a model with limited commitment and (possible) default. We appropriately modify the definition of finitely effective debt constraints, introduced by Levine and Zame (1996) (see also Levine and Zame (2002)), to encompass models with limited commitment, default penalties and collateral. Along this line, we introduce in the setting of Araujo...

On endogenous market incompleteness, cycles and growth

Dmitriev, Alexandre
Fonte: Bellaterra : Universitat Autònoma de Barcelona, Publicador: Bellaterra : Universitat Autònoma de Barcelona,
Tipo: Tesis i dissertacions electròniques; info:eu-repo/semantics/doctoralThesis Formato: application/pdf
Publicado em //2008 Português
Relevância na Pesquisa
25.99%
Consultable des del TDX; Títol obtingut de la portada digitalitzada; Esta tesis doctoral consiste en tres ensayos independientes sobre Macroeconomía y Crecimiento Económico. Ensayo 1. "Technological Transfers, Limited Commitment and Growth" Las evidencias muestran que hay sustanciales flujos de capital de países ricos hacia países pobres, aunque no son tan abundantes como sugieren las diferencias en tasas de rendimiento. Esos flujos son pro-cíclicos: abundantes en tiempos de bonanza y escasos en los malos tiempos. Los modelos de crecimiento convencional afrontan ciertas dificultades para explicar estos hechos. En este estudio, proponemos un modelo dinámico de flujos de capital hacia países en desarrollo que es cualitativamente consistente con regularidades empíricas. El modelo está basado en tres premisas principales: i) los contratos de préstamo internacional son imperfectamente ejecutables; ii) el acceso a los mercados financieros internacionales está relacionado con transferencias tecnológicas a un país en desarrollo del resto del mundo; iii) algunos de los beneficios tecnológicos asociados al acceso a la financiación externa son perecederos. Nuestras conclusiones sugieren que las transferencias tecnológicas pueden desempeñar el papel de mecanismo que hace cumplir las obligaciones contractuales. Essay 2. "A Note on Computing Partial Derivatives of the Value Function by Simulation" Los problemas que contienen restricciones de compatibilidad de incentivos han recibido una amplia atención en la literatura debido a los recientes avances en optimización dinámica. Frecuentemente las condiciones de optimalidad para este tipo de problemas contienen derivadas parciales de la función de valor (value function) con respecto a algunas variables de estado endógenas. En este trabajo proponemos un algoritmo para calcular estas derivadas parciales por simulación. Essay 3. "Institutions and Growth: Some Evidence from Estimation Methods Partially Robust to Weak Instruments" Este estudio se centra en la estrategia empírica propuesto por Hall y Jones (1999) para estimar el efecto de lo que ellos denominan «infraestructura social» sobre la productividad de los países. Nosotros intentamos responder la crítica de Acemoglu et al (2001) a esta metodología por basarse en instrumentos geográficos. Para ello consideramos el problema de identificación débil en los modelos de variables instrumentales de Hall y Jones (1999). La evidencia obtenida de los estimadores parcialmente robustos como k-class y jackknife está interpretada en base a los estudios de Monte Carlo. Podemos concluir que el uso de algunos estimadores k-class permite utilizar variables lingüísticas para instrumentar la calidad institucional a pesar de su baja correlación con el regresor endógeno en cuestión.; This doctoral thesis consists of three self-contained essays in Macroeconomics and Economic Growth. Essay 1. "Technological Transfers...

On the individual optimality of economic integration

Castro, Rui; Koumtingué, Nelnan
Fonte: Université de Montréal Publicador: Université de Montréal
Tipo: Artigo de Revista Científica
Português
Relevância na Pesquisa
35.85%
Which countries find it optimal to form an economic union? We emphasize the risk-sharing benefits of economic integration. Consider an endowment world economy model, where international financial markets are incomplete and contracts not enforceable. A union solves both frictions among member countries. We uncover conditions on initial incomes and net foreign assets of potential union members such that forming a union is welfare-improving over standing alone in the world economy. Consistently with evidence on economic integration, unions in our model occur (i) relatively infrequently, and (ii) emerge more likely among homogeneous countries, and (iii) rich countries.

Essays in macroeconomics and corporate finance.

Perez, Ander
Fonte: London School of Economics and Political Science Thesis Publicador: London School of Economics and Political Science Thesis
Tipo: Thesis; NonPeerReviewed Formato: application/pdf
Publicado em //2008 Português
Relevância na Pesquisa
36.1%
This thesis consists of three essays at the intersection of macroeconomics and corporate finance. The broad theme that links the three chapters is the study of how endogenous borrowing constraints that affect firms and financial intermediaries influence aggregate investment. In Chapter I, the existing theoretical framework studying how financial constraints in firms may make economies more sensitive to shocks (the 'financial accelerator') is extended to take account of firms' precautionary investment behaviour when they anticipate future liquidity constraints. This behaviour is at the source of a powerful amplification mechanism of shocks, and is also able to account for the documented dynamics of the composition of investment across the business cycle: in particular how risky, illiquid investment as a share of total investment fluctuates both at the firm and at the aggregate level. Chapter II studies how the public supply of liquidity affects the private creation of liquidity by firms (inside liquidity), and how this interacts with firms' demand for liquidity to influence investment and capital accumulation. The conditions under which government debt may boost or reduce private investment are shown to depend on three channels: (1) a crowding-in effect...