Financial Liberalization, Debt Mismatch, Allocative Efficiency, and Growth
Romain Rancière
(1, 2, 3, 4)
,
Aaron Tornell
(5)
Résumé
Financial liberalization increases growth, but leads to more crises and costly bailouts. We present a two-sector model in which liberalization, by allowing debt-denomination mismatch, relaxes borrowing limits in the financially constrained sector, but endogenously generates crisis risk. When regulation restricts external financing to standard debt, liberalization preserves financial discipline and may increase allocative efficiency, growth, and consumption possibilities. By contrast, under unfettered liberalization that also allows uncollateralized option-like liabilities, discipline breaks down, and efficiency falls. The model yields a testable gains-from-liberalization condition, which holds in emerging markets. It also helps rationalize the contrasting experience of emerging markets and the recent US housing crisis.
Domaines
Economies et financesFormat du dépôt | Notice |
---|---|
Type de dépôt | Article dans une revue |
Titre |
en
Financial Liberalization, Debt Mismatch, Allocative Efficiency, and Growth
|
Résumé |
en
Financial liberalization increases growth, but leads to more crises and costly bailouts. We present a two-sector model in which liberalization, by allowing debt-denomination mismatch, relaxes borrowing limits in the financially constrained sector, but endogenously generates crisis risk. When regulation restricts external financing to standard debt, liberalization preserves financial discipline and may increase allocative efficiency, growth, and consumption possibilities. By contrast, under unfettered liberalization that also allows uncollateralized option-like liabilities, discipline breaks down, and efficiency falls. The model yields a testable gains-from-liberalization condition, which holds in emerging markets. It also helps rationalize the contrasting experience of emerging markets and the recent US housing crisis.
|
Auteur(s) |
Romain Rancière
1, 2, 3, 4
, Aaron Tornell
5
1
International Monetary Fund (IMF)
( 302029 )
-
- France
2
CEPR -
Center for Economic Policy Research
( 143559 )
- Royaume-Uni
3
PSE -
Paris-Jourdan Sciences Economiques
( 139754 )
- 48 boulevard Jourdan 75014 Paris
- France
4
PSE -
Paris School of Economics
( 301309 )
- 48 boulevard Jourdan 75014 Paris
- France
5
UCLA -
University of California [Los Angeles]
( 72398 )
- Los Angeles, Californie 90095
- États-Unis
|
Langue du document |
Anglais
|
Nom de la revue |
|
Vulgarisation |
Non
|
Comité de lecture |
Oui
|
Audience |
Internationale
|
Date de publication |
2016-04
|
Volume |
8
|
Numéro |
2
|
Page/Identifiant |
1-44
|
Domaine(s) |
|
Financement |
|
Mots-clés |
en
Financial liberalization
|
DOI | 10.1257/mac.20130190 |
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