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Time-Varying Influence of Household Debt 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; Department of Business and Management, Webster Vienna Private University, Praterstraße 23, 1020 Vienna, Austria)

  • Rangan Gupta

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

  • Chi Keung Marco Lau

    (Huddersfield Business School, University of Huddersfield, Huddersfield, HD1 3DH, UK)

Abstract

The United Kingdom (UK) in terms of income inequality is ranked among the highest in Europe. Likewise, within the last four decades, UK is characterized with drastic increases in household debt. In this paper, we analyze time-varying predictability of growth in household debt for growth in income (and consumption) inequality based on a high-frequency (quarterly) data set over 1975:Q2 to 2016:Q1. Results indicate that the growth in household debt has a strong predictive power, both for within and out-of-samples, on growth rate of income (and consumption) inequality in the UK. Interestingly, the strength of the predictive power is found to have increased after 2008. Based on time-varying impulse response functions, we also find that higher growth rate in household debt corresponds with subsequent increases in income inequality.

Suggested Citation

  • Edmond Berisha & David Gabauer & Rangan Gupta & Chi Keung Marco Lau, 2020. "Time-Varying Influence of Household Debt on Inequality in United Kingdom," Working Papers 202017, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:202017
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    Cited by:

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    3. Cepni, Oguzhan & Emirmahmutoglu, Furkan & Guney, Ibrahim Ethem & Yilmaz, Muhammed Hasan, 2023. "Do the carry trades respond to geopolitical risks? Evidence from BRICS countries," Economic Systems, Elsevier, vol. 47(2).

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    More about this item

    Keywords

    Household Debt; 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
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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