Income inequality, equities, household debt, and interest rates: Evidence from a century of data

Edmond Berisha, John Meszaros and Eric Olson ()

Journal of International Money and Finance, 2018, vol. 80, issue C, 1-14

Abstract: Using Philippon’s (2015) recently published historical household debt data, this paper uses Diebold and Yilmaz’s (2012) generalized variance decompositions and generalized impulse responses to understand the relationship between interest rates, the stock market, household debt, and the distribution of income in the U.S. The results indicate that increases in the stock market and household debt increase income inequality. Moreover, the relationship between the interest rate and income inequality is found to be negative and statistically significant. We interpret our results as suggesting that high income earners derive a larger portion of their income from interest rate sensitive assets.

Keywords: Income inequality; Interest rates; Household debt (search for similar items in EconPapers)
JEL-codes: D31 E44 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:80:y:2018:i:c:p:1-14

DOI: 10.1016/j.jimonfin.2017.09.012

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