Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/310338 
Year of Publication: 
2024
Series/Report no.: 
Sveriges Riksbank Working Paper Series No. 442
Publisher: 
Sveriges Riksbank, Stockholm
Abstract: 
We investigate the growth-finance nexus in an endogenous growth model with search frictions and congestion effects in credit and innovation markets. The interplay between these two frictions generates a nonlinear relationship between finance and growth. Financial development eases the financing of innovation but can exacerbate bottlenecks in R&D. In a calibration close to the U.S. economy, finance has a negative impact on growth. This effect is quantitatively small- consistent with the observation that, in the last century, most developed economies have experienced an expansion of the financial sector and almost constant growth rates of GDP.
Subjects: 
Growth
Finance
Search frictions
Technology
Innovation
JEL: 
E51
G24
O40
Document Type: 
Working Paper

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