Abstract
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.
| Original language | English |
|---|---|
| Pages (from-to) | 701-714 |
| Number of pages | 14 |
| Journal | Journal of European Economic Association |
| Volume | 3 |
| Issue number | 2-3 |
| Publication status | Published - 2005 |