TY - JOUR
T1 - Financial distortions and economic growth
T2 - Empirical evidence
AU - Wang, Fuhmei
N1 - Funding Information:
Fuhmei Wang ([email protected]) is a professor in the Department of Economics, National Cheng Kung University, Taiwan. The author thanks two anonymous referees and the editor for helpful comments on an earlier draft of this paper. Financial support from the National Science Council in Taiwan under Contract NSC 92-2415-H-006-003 is herewith gratefully acknowledged. The usual disclaimer applies.
PY - 2009/5/1
Y1 - 2009/5/1
N2 - Conventional wisdom suggests a negative relation between financial distortions and economic growth. This paper incorporates the financial premium, a good proxy for the degree of restrictions on financial transactions, into a standard AK-type endogenous growth model. The analytical results suggest that such a relationship does not exist. Economic growth is insulated by the financial premium, contrasting with previously held beliefs. Agents' patience and the attitude of relative risk aversion are noteworthy in explaining the effects of external distortions on economic growth. Our findings may apply to economies with parallel exchange markets.
AB - Conventional wisdom suggests a negative relation between financial distortions and economic growth. This paper incorporates the financial premium, a good proxy for the degree of restrictions on financial transactions, into a standard AK-type endogenous growth model. The analytical results suggest that such a relationship does not exist. Economic growth is insulated by the financial premium, contrasting with previously held beliefs. Agents' patience and the attitude of relative risk aversion are noteworthy in explaining the effects of external distortions on economic growth. Our findings may apply to economies with parallel exchange markets.
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U2 - 10.2753/REE1540-496X450304
DO - 10.2753/REE1540-496X450304
M3 - Article
AN - SCOPUS:67650825665
SN - 1540-496X
VL - 45
SP - 56
EP - 66
JO - Emerging Markets Finance and Trade
JF - Emerging Markets Finance and Trade
IS - 3
ER -
