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Does income inequality contribute to credit cycles?

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Abstract

Recent literature presented arguments linking income inequality to the financial crash of 2007–2008. One proposed channel is expected to work through bank credit. I analyze the relationship between income inequality and bank credit in a panel cointegration framework and find that they have a long-run dependency relationship. Results show that income inequality contributed to the increase of bank credit in developed economies after the Second World War.

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Authors and Affiliations

  1. Helsinki Center of Economic Research, University of Helsinki, Helsinki, Finland

    Tuomas Malinen

  2. Department of Political and Economic Studies, University of Helsinki, P.O.Box 17 (Arkadiankatu 7), FIN–00014, Helsinki, Finland

    Tuomas Malinen

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  1. Tuomas Malinen
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Correspondence to Tuomas Malinen.

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Malinen, T. Does income inequality contribute to credit cycles?. J Econ Inequal 14, 309–325 (2016). https://doi.org/10.1007/s10888-016-9334-6

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  • DOI: https://doi.org/10.1007/s10888-016-9334-6

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