Aggregate implications of credit market imperfections

Kiminori Matsuyama*

*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceedingChapter

39 Scopus citations

Abstract

Credit market imperfections provide the key to understanding many important issues in business cycles, growth and development, and international economics. Recent progress in these areas, however, has left in its wake a bewildering array of individual models with seemingly conflicting results. This paper offers a road map. Using the same single model of credit market imperfections throughout, it brings together a diverse set of results within a unified framework. In so doing, it aims to draw a coherent picture, so that one is able to see close connections between these results, thereby showing how a wide range of aggregate phenomena may be attributed to the common cause. They include, among other things, endogenous investment-specific technical changes, development traps, leapfrogging, persistent recessions, recurring boom-and-bust cycles, reverse international capital flows, the rise and fall of inequality across nations, and the patterns of international trade. The framework is also used to investigate some equilibrium and distributional impacts of improving the efficiency of credit markets. One recurring finding is that the properties of equilibrium often respond nonmonotonically to parameter changes, which suggests some cautions for studying aggregate implications of credit market imperfections within a narrow class or a particular family of models.

Original languageEnglish (US)
Title of host publicationNBER Macroeconomics Annual
EditorsDaron Acemoglu, Kenneth Rogoff, Michael Woodford
Pages1-60
Number of pages60
StatePublished - Dec 1 2007

Publication series

NameNBER Macroeconomics Annual
Volume22
ISSN (Print)0889-3365

ASJC Scopus subject areas

  • Economics and Econometrics

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