A Model of Endogenous Financial Inclusion: Implications for Inequality and Monetary Policy

We propose a monetary model with endogenous credit market participation to study the impact of financial inclusion on inequality and welfare. find that consumption results from differences in agents' decision access services. This heterogeneity generates pecuniary externality, potentially resulting some agents overconsuming. Moreover, policy has distributional consequences. To quantify these effects, we calibrate our India, accounting for third observed inequality. Finally, analyze various policies aimed at increasing direct transfer bank account holders yields highest welfare lowest