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Information, Finance, and Markets: The Architecture of Allocative Mechanisms

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  • Bruce C. Greenwald
  • Joseph E. Stiglitz

Abstract

While bankers and businessmen have long recognized the importance of finance. financial constraints, and financial institutions, they have played a secondary role in neoclassical economic theory. This paper identifies the economic functions with which financial institutions have been concerned, the central problems which they face, and the alternative ways by which those problems can and have been addressed. The importance of limited liability and the legal environment is stressed. The final section explores the relationship between information-based finance constraints, the evolution of the firm, and the growth of the economy.

Suggested Citation

  • Bruce C. Greenwald & Joseph E. Stiglitz, 1991. "Information, Finance, and Markets: The Architecture of Allocative Mechanisms," NBER Working Papers 3652, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3652
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    2. Kane, Edward J., 1997. "Making bank risk shifting more transparent," Pacific-Basin Finance Journal, Elsevier, vol. 5(2), pages 143-156, June.
    3. Kenney, Martin & Patton, Donald, 2003. "Innovation and Social Capital in Silicon Valley," UCAIS Berkeley Roundtable on the International Economy, Working Paper Series qt25w6w54t, UCAIS Berkeley Roundtable on the International Economy, UC Berkeley.
    4. Patton, Donald & Kenney, Martin, 2003. "The Spatial Distribution of Entrepreneurial Support Networks: Evidence from Semiconductor Inital Public Offerings from 1996 through 2000," UCAIS Berkeley Roundtable on the International Economy, Working Paper Series qt7mb03695, UCAIS Berkeley Roundtable on the International Economy, UC Berkeley.
    5. Ralph A. Winter, 1991. "The Liability Insurance Market," Journal of Economic Perspectives, American Economic Association, vol. 5(3), pages 115-136, Summer.

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