TY - JOUR
T1 - North-South lending and endogenous domestic capital market inefficiencies
AU - Gertler, Mark
AU - Rogoff, Kenneth
N1 - Funding Information:
and to the National for financial support.
Copyright:
Copyright 2014 Elsevier B.V., All rights reserved.
PY - 1990/10
Y1 - 1990/10
N2 - We develop an open-economy model of intertemporal trade under asymmetric information. Capital market imperfections are endogenous and depend on a country's stage of economic development. Relative to the perfect-information benchmark, North-South capital flows are dampened (and possibly reversed) and world interest rates are lower. Whereas riskless rates are equalized across borders, the domestic loan rate is higher in poorer countries. The model can be applied to a number of policy issues including the debt-overhang problem, the indexation of foreign public debts, and the effect of income distribution on growth.
AB - We develop an open-economy model of intertemporal trade under asymmetric information. Capital market imperfections are endogenous and depend on a country's stage of economic development. Relative to the perfect-information benchmark, North-South capital flows are dampened (and possibly reversed) and world interest rates are lower. Whereas riskless rates are equalized across borders, the domestic loan rate is higher in poorer countries. The model can be applied to a number of policy issues including the debt-overhang problem, the indexation of foreign public debts, and the effect of income distribution on growth.
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U2 - 10.1016/0304-3932(90)90022-V
DO - 10.1016/0304-3932(90)90022-V
M3 - Article
AN - SCOPUS:44949290086
SN - 0304-3932
VL - 26
SP - 245
EP - 266
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
IS - 2
ER -