Exploring the Link between Household Debt and Income Inequality: An Asymmetric Approach
12 Pages Posted: 2 Jun 2016
Date Written: May 31, 2016
We investigate the relationship between household debt and income inequality in the US, allowing for asymmetry, using data over the period 1913-2008. We find evidence of an asymmetric cointegration between household debt and inequality for different regimes. Our results indicate household debt only responds to positive changes in income inequality, while there is no evidence of falling inequality significantly affecting household debt. The presence of this asymmetry provides further empirical insights into the emerging literature on household debt and inequality.
Keywords: Household Debt, Income Inequality, Credit Asymmetry, Non-Linear ARDL
JEL Classification: C22, C51, C52, D31
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