01748cas a2200241 a 4500 AALejournalIMF006848 230101c9999 xx r poo 0 0eng d 5.00 USD 9781455210749 1018-5941 BD-DhAAL BD-DhAAL Piazza, Roberto. Growth and Crisis, Unavoidable Connection? / Roberto Piazza. Washington, D.C. : International Monetary Fund, 2010. 1 online resource (33 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students In emerging economies periods of rapid growth and large capital inflows can be followed by sudden stops and financial crises. I show that, in the presence of financial markets imperfections, a simple modification of a neoclassical growth model can account for these facts. I study a growth model for a small open economy where decreasing marginal returns to capital appear only after the country has reached a threshold level of development, which is uncertain. Limited enforceability of contracts allows default on international debt. International investors optimally choose to suddenly restrict lending when the appearance of decreasing marginal returns slows down growth. The economy defaults and enters a financial crisis. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2010/267 Full text available on IMF http://elibrary.imf.org/view/journals/001/2010/267/001.2010.issue-267-en.xml IMF e-Library