Banks, liquidity crises and economic growth

Welcome to the UPF Digital Repository

Gaytan, Alejandro; Rancière, Romain. Banks, liquidity crises and economic growth. 2001
http://hdl.handle.net/10230/643
To cite or link this document: http://hdl.handle.net/10230/643
dc.contributor.author Gaytan, Alejandro
dc.contributor.author Rancière, Romain
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
dc.date.issued 2001-08-01
dc.identifier.uri http://hdl.handle.net/10230/643
dc.description.abstract How do the liquidity functions of banks affect investment and growth at different stages of economic development? How do financial fragility and the costs of banking crises evolve with the level of wealth of countries? We analyze these issues using an overlapping generations growth model where agents, who experience idiosyncratic liquidity shocks, can invest in a liquid storage technology or in a partially illiquid Cobb Douglas technology. By pooling liquidity risk, banks play a growth enhancing role in reducing inefficient liquidation of long term projects, but they may face liquidity crises associated with severe output losses. We show that middle income economies may find optimal to be exposed to liquidity crises, while poor and rich economies have more incentives to develop a fully covered banking system. Therefore, middle income economies could experience banking crises in the process of their development and, as they get richer, they eventually converge to a financially safe long run steady state. Finally, the model replicates the empirical fact of higher costs of banking crises for middle income economies. –
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 853
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
dc.title Banks, liquidity crises and economic growth
dc.type info:eu-repo/semantics/workingPaper
dc.date.modified 2014-06-03T07:14:14Z
dc.subject.keyword Macroeconomics and International Economics
dc.subject.keyword olg growth models
dc.subject.keyword liquidity
dc.subject.keyword financial intermediation
dc.subject.keyword financial fragility
dc.subject.keyword banking crises
dc.rights.accessRights info:eu-repo/semantics/openAccess


See full text
This document is licensed under a Creative Commons license:

Search


Advanced Search

Browse

My Account

Statistics