IDEAS home Printed from https://ideas.repec.org/p/pre/wpaper/202030.html
   My bibliography  Save this paper

Time-Varying Predictability of Financial Stress on Inequality in United Kingdom

Author

Listed:
  • Edmond Berisha

    (Feliciano School of Business, Montclair State University, Montclair, NJ 07043, USA)

  • David Gabauer

    (Institute of Applied Statistics, Johannes Kepler University, Altenbergerstraße 69, 4040 Linz, Austria)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

  • Jacobus Nel

    (Department of Economics, University of Pretoria, Pretoria, 0002, South Africa)

Abstract

In this paper, we analyze time-varying predictability of financial stress for growth in income (and consumption) inequality of the United Kingdom (UK) based on a high-frequency (quarterly) data set over 1975:2 to 2016:1. Results indicate that a well-established index of financial stress, derived from the European Central Bank, has a strong predictive power on growth rate of income (and to some extent consumption) inequality in the UK. Interestingly, the strength of the predictive power is found to be higher towards the beginning and end of the sample period corresponding to highly stressed financial markets in the UK. In addition, based on time-varying impulse response functions, we find that higher financial stress corresponds with subsequent increases in income inequality. Finally, the FSI is found to produce forecasting gains for the growth of income inequality over an out-of-sample period, especially at medium to long-runs.

Suggested Citation

  • Edmond Berisha & David Gabauer & Rangan Gupta & Jacobus Nel, 2020. "Time-Varying Predictability of Financial Stress on Inequality in United Kingdom," Working Papers 202030, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202030
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    More about this item

    Keywords

    Financial Stress; Inequality; Time-Varying Predictions;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • G01 - Financial Economics - - General - - - Financial Crises

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pre:wpaper:202030. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Rangan Gupta (email available below). General contact details of provider: https://edirc.repec.org/data/decupza.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.