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Does income inequality contribute to credit cycles?

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  • Malinen, Tuomas

Abstract

Recent literature has presented arguments linking income inequality on the financial crash of 2007 - 2009. One proposed channel is expected to work through bank credit. 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.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 52831.

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Date of creation: Apr 2014
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Handle: RePEc:pra:mprapa:52831

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Keywords: top 1% income share; bank loans; cointegration;

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