Loan Processing Costs and Information Asymmetries-Implications for Financial Sector Development and Economic Growth

Salvatore Capasso and George Mavrotas

No DP2003-84, WIDER Working Paper Series from World Institute for Development Economic Research (UNU-WIDER)

Abstract: The paper presents a model in which credit-constrained firms might delay the adoption of new and more productive technologies because of the very high external financing costs they face. Our point of departure is that the efficiency of the banking system can have a profound impact on real resource and investment allocation not only directly, by reducing the amount of resources channeled to the credit market, but also indirectly by affecting entrepreneurs' investment decisions.

Keywords: Banking; Credit; Economic development; Transaction costs (search for similar items in EconPapers)
Date: 2003
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Citations: View citations in EconPapers (4)

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