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Title: |
Costly Adjustment and Limited Borrowing |
| Author: |
Aizenman,
Joshua; Selowsky, Marcelo |
| Author
Affiliation: |
Dartmouth
College and NBER; World Bank |
| Source: |
International Economic Journal, Summer 1991, v. 5, no. 2, pp. 17-38 |
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Publication Date: |
Summer 1991 |
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Abstract: |
This paper demonstrates that
time-dependent reallocation costs may play an important role in
explaining the welfare costs of credit rationing in the presence of
adverse real shocks. While there is no way to escape the need for
structural adjustment to real shocks, the desired speed of adjustment is
determined by the nature of the reallocation costs. Whenever the
reallocation costs are negatively related to the planning time that has
been available before the movements of factors, there is an important
role for credit assistance in reducing the resources lost in the
reallocations process. |
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