Inflation, Financial Developments, and Wealth Distribution

Author/Editor:

Wai-Yip Alex Ho ; Chun-Yu Ho

Publication Date:

July 6, 2016

Electronic Access:

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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 find that from 1995 to 2002 in China, the dispersion of wealth decreased, the moneywealth ratio increased for all wealth levels and the aggregate money-output ratio increased. We develop a two-asset dynamic general equilibrium model in which households face a portfolio adjustment cost and a borrowing constraint. We find that financial development lowers the dispersion of wealth by reducing the precautionary motive of households. In addition, tight monetary policies increase the value of money and thus increase the moneywealth ratio for all wealth levels and the aggregate money-output ratio.

Series:

Working Paper No. 16/132

Subject:

English

Publication Date:

July 6, 2016

ISBN/ISSN:

9781498352826/1018-5941

Stock No:

WPIEA2016132

Format:

Paper

Pages:

51

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