Authors

• Luis Carranza (lcarranza@grupobbv.com.pe)
• José E. Galdón-Sánchez (jose.galdon@unavarra.es)
  Public University of Navarra

Abstract
In this paper we build a model of financial intermediation that explains the GDP variability pattern of an economy during the development process. We find evidence that per capita output is more volatile in middle-income economies than in both low and high-income economies. We show that, if the model economy is in the early or in the mature stages of development, there is a unique equilibrium. However, in the middle stages of development, multi-ple equilibria arise. Moreover, we find that in economies with imperfect credit markets, per capita output volatility tends to be higher than in economies with perfect or non-existent credit markets.

Classification JEL:E00; O11; O16; O40

Number of Pages:45

Creation Date:2002-06-01

Number:null/02