Chakraborty, Shankha

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https://hdl.handle.net/1794/3687

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Browsing Chakraborty, Shankha by Author "Ray, Tridip"

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    Bank-based versus Market-based Financial Systems: A Growth-theoretic Analysis
    (University of Oregon, Dept. of Economics, 2003-02-01) Chakraborty, Shankha; Ray, Tridip
    We study bank-based and market-based financial systems in an endogenous growth model. Lending to firms is fraught with moral hazard as owner-managers may reduce investment profitability to enjoy private benefits. Bank monitoring partially resolves the agency problem, while market-finance is more ‘hands-off’. A bank-based or market-based system emerges from firm financing choices. It is not possible to say unequivocally which of the two systems is better for growth. The growth rate depends, crucially, on the efficiency of financial and legal institutions. But a bank-based system outperforms a market-based one along other dimensions. Investment and per capita income are higher, and income inequality lower, under a bank-based system. Bank-based systems are more conducive for broad-based industrialization. A temporary income redistribution, under both financial systems, results in permanent improvement in per capita income as well as income distribution.
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    The Development and Structure of Financial Systems
    (University of Oregon, Dept. of Economics, 2003-11-01) Chakraborty, Shankha; Ray, Tridip
    We introduce monitored bank loans and non-monitored tradeable securities as sources of external finance for firms in a dynamic general equilibrium model. Due to frictions arising from moral hazard, access to credit and each type of financial instrument are determined by the wealth distribution. We study the depth of credit markets (financial development) and conditions under which the financial system relies more on either type of external finance (financial structure). We identify initial inequality, investment size and institutional factors as key determinants of financial development, while an economy’s financial structure is shaped by its investment technology and legal and financial institutions. The model’s predictions are consistent with historical and recent development experience.
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    Inequality, Industrialization and Financial Structure
    (University of Oregon, Dept. of Economics, 2003-01-01) Chakraborty, Shankha; Ray, Tridip
    We introduce monitored bank loans and non-monitored tradeable securities as sources of external finance for firms in a dynamic general equilibrium model. Due to frictions arising from moral hazard, access to credit and each type of financial instrument are determined by the wealth distribution. We study the depth of credit markets (financial development) and conditions under which the financial system relies more on either type of external finance (financial structure). Initial inequality is shown to determine financial development, with high inequality preventing developed systems from emerging. A more equitable income distribution as well as larger capital requirements of industry tend to promote a bank-based system. Investment risk promotes a greater reliance on non- monitored sources, while institutional parameters affect the financial structure in intuitively plausible ways. The model's predictions are consistent with historical and recent development experience.