Work

Business Cycles and Financial Crises: A Model of Entrepreneurs and Financiers

Year: 2012

Type: report

Abstract: A dynamic general equilibrium model with infinitely lived entrepreneurs and financiers is developed to investigate a possible mechanism that explains business cycles and a financial crisis. The highest growth rate is achievable only if financiers coexist with entrepreneurs, given a certain extent of financial market imperfections. However, if financiers coexist with entrepreneurs, the economy is highly likely to go into a financial crisis for some parameter values. These two-sided implications of the coexistence of entrepreneurs and financiers explain why both instability and high growth are frequently observed in modern economies.

Source: Munich Personal RePEc Archive (Ludwig Maximilian University of Munich)

Authors: Takuma Kunieda, Akihisa Shibata

Institutions: City University of Hong Kong, Kyoto University

Language: English

Topic: Economic theories and models

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDG: Decent work and economic growth

Open Access status: green

Funder: Japan Society for the Promotion of Science

Award: Complex Dynamic Analysis on Economic Crisis and Social Infrastructure