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Welfare Gain of Financial Liberalization

Author

Listed:
  • Robert M Townsend
  • Kenichi Ueda

    (Research Department International Monetary Fund)

Abstract

Financial liberalization is a controversial issue. One of the reasons is that many empirical studies report conflicting views. So far, negligible effects were found in savings and lending, while positive effects in allocating capital efficiently. However, these regression based studies are not suitable to identify the true benefit, that is, welfare gain of the financial liberalization. We compute the welfare gain of financial liberalization, by calibrating a canonical model of financial deepening and growth with actual Thai data. We find a sizable gain of financial liberalization. We also identify some disparities between de facto effects and de jure changes of financial sector policies

Suggested Citation

  • Robert M Townsend & Kenichi Ueda, 2006. "Welfare Gain of Financial Liberalization," 2006 Meeting Papers 623, Society for Economic Dynamics.
    • Handle: RePEc:red:sed006:623
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    Cited by:

    1. Ms. Enrica Detragiache & Mr. Gianni De Nicolo & Ms. Senay Agca, 2007. "Financial Reforms, Financial Openness, and Corporate Borrowing: International Evidence," IMF Working Papers 2007/186, International Monetary Fund.

    More about this item

    Keywords

    financial liberalization; welfare gain;

    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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