The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
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.