Year: 1996
Type: article
Abstract: The role of debt and equity changes over time and with the level of development. What are these changes, and why should they systematically occur across different countries and time periods? This article characterizes financial innovation as a dynamic process that both influences and is influenced by the development of the real sector. It focuses on the emergence and development of equity markets, using a model that allows for growth and for capital accumulation that is financed externally through a combination of debt and equity. As an economy develops, the aggregate ratio of debt to equity will generally fall; yet, debt and equity remain complementary sources for the financing of capital investments. The results suggest how various government policy actions might affect capital accumulation and equity market activity.
Source: The World Bank Economic Review
Authors: J. Boyd, B. Smith
Institutions: Cornell University, Federal Reserve
Language: English
Topic: Economic Theory and Policy
Domain: Social Sciences
Open Access status: green
Funders: World Bank Group, University of Minnesota
OpenAlex ID: W2109289095