Does inequality lead to credit growth? Testing the Rajan hypothesis using state-level data

Steven Yamarik (), Makram El-Shagi and Guy Yamashiro

Economics Letters, 2016, vol. 148, issue C, 63-67

Abstract: This paper uses state-level data to test the Rajan hypothesis, from his book Fault Lines, that an increase in inequality can lead to a credit boom. Using dynamic heterogeneous panel estimation methods (i.e. MG, PMG, DFE), we find a significant positive long-run relationship between inequality and real estate lending across U.S. states.

Keywords: Rajan; Inequality; Loans; Credit; PMG (search for similar items in EconPapers)
JEL-codes: E62 H71 R11 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:148:y:2016:i:c:p:63-67

DOI: 10.1016/j.econlet.2016.09.004

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