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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: 84
Date of creation: 01 Aug 2001
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Handle: RePEc:imf:imfwpa:01/108

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  1. Bencivenga, Valerie R & Smith, Bruce D, 1991. "Financial Intermediation and Endogenous Growth," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 58(2), pages 195-209, April.
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Citations

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Cited by:
  1. Biaggio Bossone & Sandeep Mahajan & Farah Zahir, 2003. "Financial Infrastructure, Group Interests, and Capital Accumulation," IMF Working Papers 03/24, International Monetary Fund.
  2. Davies, James B., 2004. "Microsimulation, CGE and Macro Modelling for Transition and Developing Economies," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  3. Robert M. Townsend & Jacob Yaron, 2001. "The credit risk-contingency system of an Asian development bank," Economic Perspectives, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Q III, pages 31-48.
  4. Robin Burgess & Rohini Pande, 2005. "Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment," American Economic Review, American Economic Association, American Economic Association, vol. 95(3), pages 780-795, June.
  5. Leonardo Becchetti & Fabio Pisani, 2010. "Microfinance, subsidies and local externalities," Small Business Economics, Springer, Springer, vol. 34(3), pages 309-321, April.
  6. Robert M. Townsend & Kenichi Ueda, 2003. "Financial Deepening, Inequality, and Growth," IMF Working Papers 03/193, International Monetary Fund.
  7. Alexander Karaivanov, 2003. "Financial Contracts and Occupational Choice," Computing in Economics and Finance 2003, Society for Computational Economics 25, Society for Computational Economics.
  8. 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.

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