Financial Intermediation and Endogenous Fluctuations in a Real Economy ¤

  title={Financial Intermediation and Endogenous Fluctuations in a Real Economy ¤},
  author={Sanjay Banerji},
In this paper, we pose the following question: can the ̄nancial system in an economy be itself the raison d'etre for endogenous cyclical °uctuations in the economy? The focus here is on the activities of ̄nancial intermediaries within the context of a simple growth model. Risk averse agents face idiosyncratic income losses, the probability of which they can a®ect though their own capital investments in an output technology. Financial intermediaries arise to provide loans for this purpose. We… CONTINUE READING

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