European Parliament Library

Identifying Constraints to Financial Inclusion and Their Impact on GDP and Inequality :, A Structural Framework for Policy, Era Dabla-Norris, Yan Ji, Robert Townsend, Filiz Unsal

Abstract
We develop a micro-founded general equilibrium model with heterogeneous agents to identify pertinent constraints to financial inclusion. We evaluate quantitatively the policy impacts of relaxing each of these constraints separately, and in combination, on GDP and inequality. We focus on three dimensions of financial inclusion: access (determined by the size of participation costs), depth (determined by the size of collateral constraints resulting from limited commitment), and intermediation efficiency (determined by the size of interest rate spreads and default possibilities due to costly monitoring). We take the model to a firm-level data from the World Bank Enterprise Survey for six countries at varying degrees of economic development—three low-income countries (Uganda, Kenya, Mozambique), and three emerging market countries (Malaysia, the Philippines, and Egypt). The results suggest that alleviating different financial frictions have a differential impact across countries, with country-specific characteristics playing a central role in determining the linkages and tradeoffs between inclusion, GDP, inequality, and the distribution of gains and losses
Table Of Contents
Cover; Contents; 1. Introduction; 2. Literature Review; 3. The Model; 3.1 Individuals; 3.1.1 Savings Regime; 3.1.2 Credit Regime; 3.1.3 Occupational Choice; FIGURES; 1. Lending Interest Rate, Monitoring Frequency, Cost of Capital, and Leverage Ratio; 2. The Occupation Choice Map in the Two Regimes; 3.2 Competitive Equilibrium; 4. Data and Calibration; TABLES; 1. Overview of the Data; 2. Data, Model and Calibrated Parameters; 5. Evaluation of Policy Options; 5.1 Reducing the Participation Cost; 5.2 Relaxing Collateral Constraints
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (50 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781475585919

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