Financial Access And Consumption Smoothing
Speaker(s) Mr. Anand Chopra, Student, IIM Calcutta Publication CAFRAL Conference room on Mezzanine Floor, Main Building. Reserve Bank of India, Fort, Mumbai 400 001
ABSTRACT

<p class="MsoNormal" style="text-align:justify">Does improving access to financial institutions always facilitate consumption smoothing? I provide empirical evidence that emerging economies who have better access to banks do worse at consumption smoothing. This is robust to controlling for level of income and capital market openness. A simple one-good small open economy model supplemented with trend shocks is calibrated to match certain business cycle moments of developed and emerging markets. The model can qualitatively account for the elasticity of the ratio of consumption volatility to income volatility to financial access for both developed and emerging economies. A two-sector extension of the model can in addition capture the non-targeted business cycle moments exceedingly well<o:p></o:p></p>