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Credit Availability And Regional Development

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  • Carlos J. Rodríguez‐Fuentes

Abstract

ABSTRACT Many economists think financial factors play no role in regional development since it is usually assumed that money can only affect the general level of prices but not the real output, that is, money is neutral to the economic process. According to this traditional view, the banking system is neutral to regional development since it simply allocates scarce financial resources among regions; although it is sometimes acknowledged that it might not be neutral when due to market failure some regional credit markets are isolated. This article argues that banks are never neutral from a regional point of view, since they do not simply intermediate between savers and borrowers, but they also provide credit to let investment and output grow. In particular it is suggested that banks may influence regional development by producing a regional pattern of credit availability that is likely to be spatially unbalanced.

Suggested Citation

  • Carlos J. Rodríguez‐Fuentes, 1998. "Credit Availability And Regional Development," Papers in Regional Science, Wiley Blackwell, vol. 77(1), pages 63-75, January.
    • Handle: RePEc:bla:presci:v:77:y:1998:i:1:p:63-75
    DOI: 10.1111/j.1435-5597.1998.tb00708.x
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