Nabi, Mahmoud Sami and Rajhi, Taoufik (2002): Banking Efficiency and the Economic Transition Process.
Download (328kB) | Preview
This paper investigates the role of the banking system in the economic transition process. This is considered in the context of an overlapping generation model with endogenous growth. There are two production technologies, one for the production of a final good and the other for the production of an investment good. The return of caital invested in the investment good technology is stochastic. Banks collect the saving of households and finance the production of the investment good while respecting some prudential rules. We show that the capital accumulation is constituted of several phases and that the economic transition process depends on the fragility of the financial system defined as the degree of the credit market perfection and the bank’s inefficiency. Hence, efficient banks enables the economy to resist to bad performances of the investment good sector. However, in case of inefficient banks, the situation can degenerate in a confidence crisis in the banking system delaying the economic transition process by several years. We show that this negative impact is more severe when the economy is less developed.
|Item Type:||MPRA Paper|
|Original Title:||Banking Efficiency and the Economic Transition Process|
|Keywords:||Banking Efficiency, Confidence Crisis, Transition Process|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O16 - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages
|Depositing User:||Mahmoud Sami NABI|
|Date Deposited:||19. Aug 2010 00:48|
|Last Modified:||15. Feb 2013 20:07|
Aghion, P. et P. Bolton (1997), ”A Theory of Trickle-Down Growth and Development," Review of Economic Studies, 64, 151-172.
Bernanke, B. et M. Gertler (1989) ”Agency Cost, New Worth and Business Fluctuations," American Economic Review, 79 (1989), 14-31.
Bernanke, B. et M. Gertler (1990) ”Financial Fragility and Economic Performance," The Quartly Journal of Economics, 105 (1990), 87-114.
Cooper, R. et D. Corbae (2000), ”Financial Fragility and Active Monetary Policy : A Lesson from the Great Depression”, Staff Report 289, Federal Reserve Bank of Minneapolis.
Goldsmith, R.R. (1969), ”Financial Structure and Development”, Yale University Press, New Haven.
Greenwood, J. et B. Jovanovic (1990), ”Financial Development, Growth and the Distribution of Income”, Journal of Political Economy, 98, 1076-1107.
Guillard, M. et T. Rajhi (1993), ”Une Note sur les Liens entre Croissance et taux d’Intérêt”, Revue Economique, 44, 229-255.
Gurely, J. et E. Shaw (1960), ”Money in Theory and Finance”, The Brooking Institute, Washington.
Mankiw, G. (1986), ”The Allocation of Credit and Financial Collapse”, The Quartly Journal of Economics, 101 (1986), 455-477.
McKinnon, R.I. et H. Pill (1997) ”Credible Economic Liberalization and Overborrowing”, American Economic review (Papers and Proceedings), 87,189-193.
Matsuyama, K. (2000), ”Endogenous Inequality”, Review of Economic Studies, 67 (october), 743-759.
Matsuyama, K. (2001), ”Financial Market Globalization and Endogenous Inequality of Nations”, The Center For Mathematical Studies in Economics and Management Science (Northwestern University), Discussion Paper No 1300.
Wachtel, P. (1999), ”Market Oriented Banking, Economic Growth and International Financial Stability”, Working Paper, New York University.