Financing development
Subtitle: the role of information costs
By: Jeremy Greenwood, Juan M. Sanchez, Cheng Wang
Contributors: Sanchez, Juan M.; Wang, Cheng; National Bureau of Economic Research
Series: NBER working paper series -- working paper 13104; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 13104.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] :
Description: "How does technological progress in financial intermediation affect the economy? To address this question a costly-state verification framework is embedded into a standard growth model.  In particular, financial intermediaries can invest resources to monitor the returns earned by firms.  The inability to monitor perfectly leads to firms earning rents.  Undeserving firms are financed, while deserving ones are under funded.  A more efficient monitoring technology squeezes the rents earned by firms.  With technological advance in the financial sector, the economy moves continuously from a credit-rationing equilibrium to a perfectly efficient competitive equilibrium.  A numerical example suggests that finance is important for growth"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 7/16/2007.

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.