A Growth Cycles Interaction with Imperfect Credit Market
Résumé
Within the Endogenous Growth paradigm, this paper studies the relationship between cycles and growth. The paper questions the positive influence that recessions may have on growth. Instead of paying attention to the innovation – market structure relationship, it focuses on the innovation – financial markets imperfections relationship. A model is developed where all investment is financed via credit extension characterised by credit rationing due to the asymmetric information hypothesis. In that context, we show that monetary policy is not neutral anymore and that finance may boost growth in smoothing intertemporal fluctuations through the credit channel.
Domaines
Economies et finances
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