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Transitional Growth with Increasing Inequality and Financial Deepening

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  • Mr. 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.

Suggested Citation

  • Mr. Kenichi Ueda, 2001. "Transitional Growth with Increasing Inequality and Financial Deepening," IMF Working Papers 2001/108, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:2001/108
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    7. James B. Davies, 2004. "Microsimulation, CGE and Macro Modelling for Transition and Developing Economies," WIDER Working Paper Series DP2004-08, World Institute for Development Economic Research (UNU-WIDER).
    8. Robert M. Townsend & Mr. Kenichi Ueda, 2003. "Financial Deepening, Inequality, and Growth: A Model-Based Quantitative Evaluation," IMF Working Papers 2003/193, International Monetary Fund.

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