Welfare Gains from Financial Liberalization
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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.
Series:
Working Paper No. 2007/154
Subject:
Banking Financial sector Financial sector policy Financial services Personal income
English
Publication Date:
July 1, 2007
ISBN/ISSN:
9781451867183/1018-5941
Stock No:
WPIEA2007154
Pages:
40
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