Welfare Gains from Financial Liberalization

Kenichi Ueda and Robert Townsend

No 2007/154, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: WP; cost reduction; economic growth; financial system (search for similar items in EconPapers)
Pages: 40
Date: 2007-07-01
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Citations: View citations in EconPapers (12)

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Journal Article: WELFARE GAINS FROM FINANCIAL LIBERALIZATION (2010)
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