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Transitional Growth with Increasing Inequality and Financial Deepening

Author/Editor: Ueda, Kenichi
Authorized for Distribution: August 1, 2001
Electronic Access: Free Full Text (PDF file size is 2,301KB)
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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 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.
Series: Working Paper No. 01/108
Subject(s): Economic growth | Financial sector | Economic models
Author's keyword(s): Transitional growth | inequality | financial deepening | transaction costs
    Published:   August 1, 2001        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA1082001   Pages:   84
    Price:   US$15.00
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