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Security creation costs and economic development

Author

Listed:
  • Pedro S. Amaral

    (California State University)

  • Erwan Quintin

    (University of Wisconsin – Madison)

Abstract

We describe a tractable general equilibrium environment in which producers can transform cash-flows at a cost to create securities that cater to the needs of heterogeneous investors. We use the resulting model to characterize the theoretical implications of reductions in the cost of cash-flow transformation activities. Those reductions result in a greater volume of cash-flow transformation but have ambiguous effects on capital formation, output, and TFP, in clear contrast to the outcome of traditional financial development exercises.

Suggested Citation

  • Pedro S. Amaral & Erwan Quintin, 2021. "Security creation costs and economic development," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 71(1), pages 283-304, February.
    • Handle: RePEc:spr:joecth:v:71:y:2021:i:1:d:10.1007_s00199-020-01245-5
    DOI: 10.1007/s00199-020-01245-5
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    References listed on IDEAS

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    Cited by:

    1. Amaral, Pedro S., 2023. "The demographic transition and the asset supply channel," European Economic Review, Elsevier, vol. 151(C).

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    More about this item

    Keywords

    Endogenous security markets; Financial engineering; Macroeconomic aggregates;
    All these keywords.

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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