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Transitional Growth with Increasing Inequality and Financial Deepening

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  • Kenichi Ueda

Abstract

We study models that display growth with financial deepening and increasing inequality along the way to perpetual steady state growth. A benchmark model is essentially a complete markets model but with transaction costs of financial intermediation. New proofs are required and thus provided for stochastic dynamic programming for the case of unbounded return functions and perpetual growth with a non-convex transaction technology. We calibrate the model and report quantitative predictions for Thailand during 1976-96. We find a discrepancy between the model and the data, suspect barriers to financial deepening as a cause, and evaluate the associated welfare loss.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 01/108.

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Length: 57
Date of creation: 01 Aug 2001
Date of revision:
Handle: RePEc:imf:imfwpa:01/108

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Citations

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Cited by:
  1. Gine, Xavier & Townsend, Robert M., 2003. "Evaluation of financial liberalization : a general equilibrium model with constrained occupation choice," Policy Research Working Paper Series 3014, The World Bank.
  2. Robert M. Townsend & Jacob Yaron, 2001. "The credit risk-contingency system of an Asian development bank," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q III, pages 31-48.
  3. Alexander Karaivanov, 2003. "Financial Contracts and Occupational Choice," Computing in Economics and Finance 2003 25, Society for Computational Economics.
  4. Robert M. Townsend & Kenichi Ueda, 2003. "Financial Deepening, Inequality, and Growth: A Model-Based Quantitative Evaluation," IMF Working Papers 03/193, International Monetary Fund.
  5. Robin Burgess & Rohini Pande, 2003. "Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment," STICERD - Development Economics Papers - From 2008 this series has been superseded by Economic Organisation and Public Policy Discussion Papers 40, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
  6. Davies, James B., 2004. "Microsimulation, CGE and Macro Modelling for Transition and Developing Economies," Working Papers UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  7. Leonardo Becchetti & Fabio Pisani, 2010. "Microfinance, subsidies and local externalities," Small Business Economics, Springer, vol. 34(3), pages 309-321, April.
  8. Biaggio Bossone & Sandeep Mahajan & Farah Zahir, 2003. "Financial Infrastructure, Group Interests, and Capital Accumulation: Theory, Evidence, and Policy," IMF Working Papers 03/24, International Monetary Fund.

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