Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/202429
Authors: 
Lahcen, Mohammed Ait
Gomis-Porqueras, Pedro
Year of Publication: 
2019
Series/Report no.: 
Working Paper 310
Abstract: 
We propose a monetary model with endogenous credit market participation to study the impact of financial inclusion on inequality and welfare. We find that consumption inequality results from differences in agents' decision to access financial services. This heterogeneity generates a pecuniary externality, potentially resulting in some agents over-consuming. Moreover, monetary policy has distributional consequences. To quantify these effects, we calibrate our model to India, accounting for a third of observed consumption inequality. Finally, we analyze various policies aimed at increasing financial inclusion and find that a direct transfer to bank account holders yields the highest welfare and lowest consumption inequality.
Subjects: 
money
credit
banking
financial inclusion
inequality
JEL: 
E40
E50
Document Type: 
Working Paper
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