Distinguishing Constraints on Financial Inclusion and Their Impact on GDP, TFP, and the Distribution of Income.

Era Dabla-Norris, Yan Ji, Robert M Townsend, D Filiz Unsal
Author Information
  1. Era Dabla-Norris: International Monetary Fund, USA.
  2. Yan Ji: Hong Kong University of Science and Technology, Hong Kong.
  3. Robert M Townsend: Massachusetts Institute of Technology, USA.
  4. D Filiz Unsal: International Monetary Fund, USA.

Abstract

A general equilibrium model featuring multiple realistic sources of financial frictions is developed to study how different constraints interact in equilibrium. We highlight, distinguish, and evaluate their differential impacts and rich interactions. The economic impact of financial inclusion policies in an economy depends not only on which constraint is alleviated, but also on the tightness of other constraints. Policy instruments should target the most binding constraint, which likely varies across countries. Moreover, there are important tradeoffs between financial inclusion, GDP, and the distribution of income. The transitional dynamics also differ from those in steady states. Policy makers should consider both.

Keywords

References

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  2. Econometrica. 2014 May;82(3):887-959 [PMID: 25246710]
  3. J Econom. 2014 Nov;183(1):91-103 [PMID: 25400319]
  4. Proc Natl Acad Sci U S A. 2017 Jun 13;114(24):6176-6184 [PMID: 28592655]

Grants

  1. R01 HD027638/NICHD NIH HHS

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