Endogenous growth and the emergence of equity finance

Bose, Niloy

doi:10.1016/j.jdeveco.2004.03.005

Cited by 18 publications

(9 citation statements)

References 37 publications

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“…11 11 We can see from the firm's balance sheet thatγ k =γ s +γ E , whereγ s =γ S −π . The common growth between physical capital and equity capital is in line with the theoretical models of Levine (1991), Boyd and Smith (1998), Blackburn et al (2005), Bose (2005) and Capasso (2008) and supported by the empirical studies of Levine and Zervos (1998), Beck and Levine (2004) and Caporale et al (2005). 12 In the model, the monetary policy is to adjust the money growth rate μ by means of purchasing/selling government bonds b G in order to peg the targeted interest rate i. Therefore,γ m =γ b G .…”

Section: Iii1 Balanced-growth Path Equilibriumsupporting

confidence: 53%

Endogenous Debt‐equity Ratio and Balance‐sheet Channel: Implications for Growth and Welfare

Shaw

Chang

Fan

2018

Bulletin of Econ Res

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This paper endogenizes the debt‐equity ratio and embodies financial leverage in a cash‐in‐advance model of endogenous growth. Our analysis finds that the debt‐equity ratio is positively related to the balanced‐growth rate, since it serves as a ‘financial accelerator’ to stimulate investment projects. Compared to previous studies, this positive relationship gives rise to an additional balance‐sheet effect, which substantially affects the macroeconomic consequences of monetary and taxation policies. Due to the existence of the balance‐sheet effect, we also find that the Friedman rule is not necessarily optimal.

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Section: Iii1 Balanced-growth Path Equilibriumsupporting

confidence: 53%

Endogenous Debt‐equity Ratio and Balance‐sheet Channel: Implications for Growth and Welfare

Shaw

Chang

Fan

2018

Bulletin of Econ Res

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“…Moreover, as shown in Boyd and Smith (1998), Blackburn et al. (2005) and Bose (2005), the equity financing becomes increasingly important while debt financing declines in importance with economic development. In that context, Boot and Thakor (1997) put forth that, as the financial system develops and borrowers gain reputation, capital markets may expand at the expense of banks.…”

Section: Resultsmentioning

confidence: 99%

Non‐linear finance–growth nexus

Huang

Lin

2009

Economics of Transition

122

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This paper revisits the question of whether the finance-growth nexus varies with the stages of economic development. Using a novel threshold regression with the instrumental variables approach proposed by Caner and Hansen (2004) to the dataset used in Levine "et�al." (2000) we detect overwhelming evidence in support of a positive linkage between financial development and economic growth, and this positive effect is larger in the low-income countries than in the high-income ones. The data also reveal that financial development tends to have stronger impacts on capital accumulation and productivity growth in the low-income countries than in the high-income ones. The findings are robust to alternative financial development measures and conditioning information sets. Copyright (c) 2009 The Authors. Journal compilation (c) 2009 The European Bank for Reconstruction and Development.

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“…Building on Bolton and Freixas, Bose (2005) explains the emergence and the development of stock markets as a result of capital accumulation. Under the assumption of endogenous bankruptcy costs, economic growth increases the cost of debt financing relative to equity financing and makes the issue of equity more convenient.…”

Section: Introductionmentioning

confidence: 99%

Endogenous Information Frictions, Stock Market Development and Economic Growth*

Capasso¹

2008

The Manchester School

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The aim of this paper is to provide further insights into the linkages between stock market development and economic growth. Under information asymmetries, higher return projects tend to be penalized since these projects are valued at the average, and lower than fair, price. This informational cost, or dilution cost, depends on the degree of informational asymmetry in the market, as well as on the type of financial contract issued by the firms-typically, equity or debt. Growth occurring, informational costs decrease and so does the cost of equity relative to debt financing which spurs the development of stock markets. Copyright � 2008 The Author.

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Endogenous growth and the emergence of equity finance

Cited by 18 publications

References 37 publications

Endogenous Debt‐equity Ratio and Balance‐sheet Channel: Implications for Growth and Welfare

Endogenous Debt‐equity Ratio and Balance‐sheet Channel: Implications for Growth and Welfare

Non‐linear finance–growth nexus

Endogenous Information Frictions, Stock Market Development and Economic Growth*

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