Journal of Economic Literature Vol. 46 No. 2 2008
Book Reviews
Abstract
Ross Levine of Brown University and NBER reviews “Volatility and Growth” by Philippe Aghion, Abhijit Banerjee,. The EconLit Abstract of the reviewed work begins “Proposes an explanation of persistent macroeconomic volatility and its effect on growth--an explanation that highlights the role of credit constraints. Sketches a simple model that explains why lenders impose limits on how much firms can borrow. Introduces productivity shocks into the so-called AK model of endogenous growth and into the Schumpeterian model of endogenous growth, and investigates how volatility affects growth in these frameworks. Reviews the existing empirical evidence on volatility and growth. Introduces credit constraints into the Schumpeterian model and describes how they result in a reduced growth rate in the most financially underdeveloped economies. Presents empirical evidence that the growth rate is in fact substantially reduced in less financially developed countries and that productivity shocks have a bigger impact on growth in these countries. Demonstrates how volatility can emerge endogenously in a world where credit constraints sometimes bind. Studies endogenous volatility in an open-economy framework, analyzes the impact of a capital account liberalization, and draws some policy conclusions. Presents a third-generation model of currency crises. Aghion is Robert C. Waggoner Professor of Economics at Harvard University. Banerjee is Ford Foundation Professor of Economics at Massachusetts Institute of Technology and the Director of the Poverty Action Lab. Index.”
- DOI
- 10.1257/jel.46.2.412.r14
- Volume
- 46
- Issue
- 2
- Pages
- 443-444
- Language
- en
- Sources
- crossref