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Welfare Gains from Financial Liberalization
Author:
Mr. Kenichi Ueda
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Robert M. Townsendnull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2007: Issue 154
Language:
English
Publication Date:
01 Jul 2007
DOI:
https://doi.org/10.5089/9781451867183.001
ISBN:
9781451867183
ISSN:
1018-5941
Pages:
40
Keywords:
WP; cost reduction; economic growth; financial system
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2007: Issue 154