TY  - JOUR
AU  - Mehra,Rajnish
AU  - Piguillem,Facundo
AU  - Prescott,Edward C.
TI  - Costly Financial Intermediation in Neoclassical Growth Theory
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14351
PY  - 2008
Y2  - September 2008
UR  - http://www.nber.org/papers/w14351
L1  - http://www.nber.org/papers/w14351.pdf
N1  - Author contact info:
Rajnish Mehra
Department of Economics
W. P. Carey School of Business
Arizona State University
PO Box 879801
Tempe, AZ  85287-9801
Tel: 480 965-6335
Fax: 480 965-0748
E-Mail: rajnish.mehra@asu.edu

Facundo Piguillem
EIEF
Via Sallustiana, 62 00187
Roma. Italia
Tel: 39066790013
Fax: 390647924872
E-Mail: facundo.piguillem@eief.it

Edward C. Prescott
Arizona State University
Economics Department
P. O. Box 879801
Tempe, AZ 85287-9801
E-Mail: edward.prescott@asu.edu
AB  - The neoclassical growth model is extended to include costly intermediated borrowing and lending between households. This is an important extension as substantial resources are used in intermediating the large amount of borrowing and lending between households. In 2007, in the United States, the amount intermediated was 1.7 times GNP, and the resources used in this intermediation amounted to at least 3.4 percent of GNP. The theory implies that financial intermediation services are an intermediate good and that the spread between borrowing and lending rates measures the efficiency of the financial sector.
ER  -