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Income inequality, consumption, credit and credit risk in a data-driven agent-based model

Georgios Papadopoulos ()

Journal of Economic Dynamics and Control, 2019, vol. 104, issue C, 39-73

Abstract: The issue of income inequality occupies a prominent position in the research agenda of academic and policy circles alike, especially after the crisis of 2008, due to its potential causal link with the development of credit bubbles and therefore the emergence of financial crises. This paper examines the long-run effect of income inequality on consumption, consumer credit and non-performing loans through the means of a data-driven agent-based model. The data-driven nature of the model enhances its ability to match historical series and thus makes it suitable for policy simulations tailored for specific economies. The analysis indicates that higher income inequality has a detrimental impact on consumption and is associated with lower volumes of consumer credit. However, the ratio of non-performing loans as a share of total loans seems to be independent of income inequality.

Keywords: Income inequality; Consumption; Consumer credit; Non-performing loans; Agent-based model (search for similar items in EconPapers)
JEL-codes: C63 D31 E21 E27 (search for similar items in EconPapers)
Date: 2019
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Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

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