“Ideal” financial development and financial overaccumulation

Hsu, Sara and Li, Jianjun and Qi, Zhao (2012): “Ideal” financial development and financial overaccumulation.

Abstract

In this paper, we examine whether there is an “ideal” level of financial development, somewhere between financial capital overaccumulation and financial capital underaccumulation. We construct a model that incorporates shadow banking or speculative financial development, financial deepening, and production. As financial deepening grows, speculation may grow in step. Where the speculative spread is larger than what the level of deepening and production can bear, financial instability may occur. Hence financial deepening may promote or constrain economic development.

• Item Type: MPRA Paper
• Language: English
• Keywords: financial deepening, economic growth, profit rate, overaccumulation
• Subjects: O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O40 - General; G - Financial Economics > G0 - General > G01 - Financial Crises; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C60 - General

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