IMF Working Papers

Financial Deepening, Inequality, and Growth: A Model-Based Quantitative Evaluation

By Robert M. Townsend, Kenichi Ueda

September 1, 2003

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Robert M. Townsend, and Kenichi Ueda. "Financial Deepening, Inequality, and Growth: A Model-Based Quantitative Evaluation", IMF Working Papers 2003, 193 (2003), accessed June 19, 2025, https://doi.org/10.5089/9781451859836.001

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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

We propose a coherent unified approach to the study of the linkages among economic growth, financial structure, and inequality, bringing together disparate theoretical and empirical literature. That is, we show how to conduct model-based quantitative research on transitional paths. With analytical and numerical methods, we calibrate and make tractable a prototype canonical model and take it to an application, namely, Thailand 1976-1996, an emerging economy in a phase of economic expansion with uneven financial deepening and increasing inequality. We broadly replicate the actual data, test the model formally, and identify anomalies.

Subject: Agroindustries, Banking, Economic sectors, Income distribution, Income inequality, National accounts, Personal income, Population and demographics

Keywords: Agroindustries, Asia and Pacific, Benchmark economy, Financial deepening, Financial system, Growth, Growth rate, Income distribution, Income inequality, Inequality, Parameter value, Personal income, Population shift, Portfolio choice, Saving rate, Thai baht, Transitional dynamics, Value function, WP

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