Does Inequality Lead to Credit Growth? Testing the Rajan Hypothesis Using State-Level Data
Economics Letters, vol. 148(C), pages 63-67.
Posted: 26 Aug 2018
Date Written: August 2018
Abstract
This paper uses state-level data to test the Rajan hypothesis, from his book Fault Lines, that an increase in inequality can lead to a credit boom. Using dynamic heterogeneous panel estimation methods (i.e. MG, PMG, DFE), we find a positive long-run relationship between inequality and real estate lending across U.S. states.
Keywords: Rajan, Inequality, Loans, Credit, PMG
JEL Classification: E62, H71, R11
Suggested Citation: Suggested Citation
Yamarik, Steven and El-Shagi, Makram and Yamashiro, Guy, Does Inequality Lead to Credit Growth? Testing the Rajan Hypothesis Using State-Level Data (August 2018). Economics Letters, vol. 148(C), pages 63-67., Available at SSRN: https://ssrn.com/abstract=3232238
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