We develop a model of financial deepening, based on the distinction between limited bilateral commitment and limited multilateral commitment. We explore the effects of secular changes in financial depth on investment and output; on intermediation and interest rates; on the long-run velocities of circulation of different monetary instruments, and the use of outside money; on the patterns of saving and trade in paper. Three stages of financial development are identified.
|Number of pages||14|
|Journal||Journal of European Economic Association|
|Publication status||Published - 2005|