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Welfare Gains from Financial Liberalization

Author/Editor: Townsend, Robert M. | Ueda, Kenichi
Authorized for Distribution: July 1, 2007
Electronic Access: Free Full Text (PDF file size is 407KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: Financial liberalization has been a controversial issue as there is little empirical evidence for its positive effects on economic growth. However, we find sizable welfare gains, 1 to 28 percent of permanent consumption though, consistent with the literature, the gain in the economic growth is ambiguous, -0.2 to 0.7 percent. We apply a canonical growth model with endogenous financial deepening to Thailand, 1976-96. As effective bank transaction costs decline, more people take advantage of financial services. We estimate the gains by comparing model simulations under the historical episode of financial liberalization to those under a hypothetical continuation of financial repression.
 
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Series: Working Paper No. 07/154
Subject(s): Financial sector | Financial systems | Economic growth | Economic models | Thailand
Author's keyword(s): Financial liberalization | welfare gain | financial deepening | economic growth
 
English  
    Published:   July 1, 2007        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA2007154   Pages:   40
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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