Inflation, Financial Developments, and Wealth Distribution

Author/Editor:

Wai-Yip Alex Ho ; Chun-Yu Ho

Publication Date:

July 6, 2016

Electronic Access:

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Summary:

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.

Series:

Working Paper No. 16/132

Subject:

China Econometric models Financial markets Income distribution Inflation Transition economies

English

Publication Date:

July 6, 2016

ISBN/ISSN:

9781498352826/1018-5941

Stock No:

WPIEA2016132

Format:

Paper

Pages:

51

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