Income Inequality, Consumption, Credit and Credit Risk in a Data-Driven Agent-Based Model

49 Pages Posted: 16 Nov 2018

Date Written: October 30, 2018

Abstract

The issue of income inequality occupies a prominent position in the research agenda of academic and policy circles alike, especially after the crisis of 2008, due to its potential causal link with the development of credit bubbles and therefore the emergence of financial crises. This paper examines the long-run effect of income inequality on consumption, consumer credit and non-performing loans through the means of a data-driven agent-based model. The data-driven nature of the model enhances its ability to match historical series and thus makes it suitable for policy simulations tailored for specific economies. The analysis indicates that higher income inequality has a detrimental impact on consumption and is associated with lower volumes of consumer credit. However, the ratio of non-performing loans as a share of total loans seems to be independent of income inequality.

Keywords: Income Inequality, Consumption, Consumer Credit, Non-Performing Loans, Agent-Based Model

JEL Classification: C63, D31, E21, E27

Suggested Citation

Papadopoulos, Georgios, Income Inequality, Consumption, Credit and Credit Risk in a Data-Driven Agent-Based Model (October 30, 2018). Available at SSRN: https://ssrn.com/abstract=3279801 or http://dx.doi.org/10.2139/ssrn.3279801

Georgios Papadopoulos (Contact Author)

Central Bank of Slovenia ( email )

Slovenska 35
Ljubljana, 1000
Slovenia

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