IMF Working Papers

Transitional Growth with Increasing Inequality and Financial Deepening

By Kenichi Ueda

August 1, 2001

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Kenichi Ueda. Transitional Growth with Increasing Inequality and Financial Deepening, (USA: International Monetary Fund, 2001) accessed December 9, 2024
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 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.

Subject: Banking, Consumption, Economic sectors, Financial sector, Income distribution, Income inequality, National accounts, Population and demographics

Keywords: Asia and Pacific, Capital level, Confidence interval, Consumption, Critical value, Economy data source, Financial deepening, Financial sector, Fixed cost, Functional equation, Income distribution, Income inequality, Inequality, Parameter value, Participation rate, Population distribution, Portfolio share, Savings rate, Setting parameter, Transaction costs, Transitional growth, Transitional value, Value function, Values function, WP

Publication Details

  • Pages:

    84

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2001/108

  • Stock No:

    WPIEA1082001

  • ISBN:

    9781451853100

  • ISSN:

    1018-5941