Informality and Macroeconomic Volatility : Do Credit Constraints Matter?

ABSTRACT: Purpose – The purpose of this paper is to study the implications of borrowing constraints characterizing the informal sector for macroeconomic volatility. Design/methodology/approach – To this end, the author develops a simple dynamic stochastic general equilibrium model wherein registered...

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Autores:
Granda Carvajal, Catalina
Tipo de recurso:
Article of journal
Fecha de publicación:
2015
Institución:
Universidad de Antioquia
Repositorio:
Repositorio UdeA
Idioma:
eng
OAI Identifier:
oai:bibliotecadigital.udea.edu.co:10495/31870
Acceso en línea:
https://hdl.handle.net/10495/31870
Palabra clave:
Economía informal
Informal sector (Economics)
Evasión de impuestos
Tax evasion
Credit constraints
Volatilidad (Economía)
Rights
openAccess
License
http://creativecommons.org/licenses/by-nc-nd/2.5/co/
Description
Summary:ABSTRACT: Purpose – The purpose of this paper is to study the implications of borrowing constraints characterizing the informal sector for macroeconomic volatility. Design/methodology/approach – To this end, the author develops a simple dynamic stochastic general equilibrium model wherein registered activity not only is the basis to determine tax liabilities, but also serves as collateral for securing debts. Such a framework allows for computational experiments to analyze the effect of informality on aggregate fluctuations. Findings – The experiments show that the credit-constrained informal sector does exert a significant influence on the cyclical volatility of consumption and investment. Originality/value – There are not many studies addressing the implications of informal economic activities for macroeconomic fluctuations. This paper contributes to the literature by developing a theoretical model showing that credit constraints characterizing these activities might play a non-negligible role in explaining the cyclical volatility of some important aggregates.