Banks, Growth and Geography
27 Pages Posted: 29 Sep 2009
Date Written: May 1, 1997
Abstract
This paper presents a general equilibrium endogenous growth model, in which financial intermediaries evaluate the quality of projects, mobilize savings to finance the most promising ones and diversify risk. Information technology available to banks is linked to geographic proximity. This valuation capacity increases the proportion of high-return projects being financed, and thereby accelerates economic growth. This positive effect does not depend on the degree of individuals' risk aversion.
Keywords: financial intermediation, endogenous growth, imperfect information, screening
JEL Classification: D82, E20, E44, G20, O16
Suggested Citation: Suggested Citation
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