Interactions between Financial Constraints and Economic Growth

J. Jerónimo, Assis Azevedo, P. C. Neves, M. Thompson

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Abstract

The financial economy and the real economy are interconnected through various, complex, and evolving transmission mechanisms, whose literary coverage is far from comprehensive. In this context, we wish to contribute to the literature on the interactions between financial constraints and economic growth. We introduce financial dynamics in the R&D-based growth literature, by bringing Bernanke, Gertler and Gilchrist’s (1999) informational asymmetries into Romer’s (1990) growth model. With the developed framework, our main goal is to examine if and how such asymmetries impact economic growth. We find that the overall impact of this form of financial constraints on long-term growth is negative.
Original languageEnglish
Article number101943
JournalNorth American Journal of Economics and Finance
Volume67
Early online date10 May 2023
DOIs
Publication statusPublished - Jul 2023

Keywords

  • Economic growth
  • Financial constraints

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

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