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Inequality Indebtedness and Financial Crises

Author

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  • Antonio Scognamillo

    (Dipartimento di Scienze per l'Economia e l'Impresa)

Abstract

This work is an empirical contribution that investigates the presence of a relationship among income inequality, household indebtedness and the erup- tion of systemic banking crises (namely the I-I-C nexus). We test this hy- pothesis on a panel of 31 countries over the period 1980-2012 within four different scenarios. We find strong evidence of a statistically significant asso- ciation between income inequality and systemic banking crises via household indebtedness (the I-I-C nexus) regardless of the specification and the estima- tion technique chosen. However, we find no evidence of a feedback effect of a systemic banking crisis on income inequality, at least in the short run. We also find that economies characterized by highly liberalized financial mar- kets are more prone to experience such a nexus. These results suggest that reforming the architecture of financial regulation and supervision is still an important issues. However, it is a necessary but not sufficient condition in order to ensure financial stability.

Suggested Citation

  • Antonio Scognamillo, 2015. "Inequality Indebtedness and Financial Crises," Working Papers - Economics wp2015_09.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    • Handle: RePEc:frz:wpaper:wp2015_09.rdf
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    Keywords

    Inequality Indebtedness Financial crisis Financial Regulation;

    JEL classification:

    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • D30 - Microeconomics - - Distribution - - - General

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