Does Income Inequality Contribute to Credit Cycles?
23 Pages Posted: 23 Nov 2013
Date Written: November 22, 2013
Recent studies by Atkinson (2011); Rajan (2010); Kumhof and Rancière (2010); Bordo and Meissner (2013) have assessed the relationship between income inequality, bank credit, and financial stability. We analyze the relationship between income inequality and bank credit in panel cointegration framework and find that they have a long-run dependency relationship. Results show that income inequality has contributed to the increase of bank credit in developed economies after the Second World War.
Keywords: top 1% income share, bank loans, cointegration
JEL Classification: C23, D31, G21
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