Does income inequality respond asymmetrically to financial development? Evidence from India using asymmetric cointegration and causality tests

Ishfaq Nazir Khanday and Md. Tarique

The Journal of Economic Asymmetries, 2023, vol. 28, issue C

Abstract: Using NARDL model and Hatemi-j-asymmetric causality test, this work scrutinizes the asymmetric interactions between income inequality and financial development in India. The empirical findings support the existence of asymmetric structures in the finance-inequality nexus. It is found that negative shocks in financial development ameliorate income inequality while as, positive shocks in financial development exacerbate income inequality in an asymmetric manner. Wald's test and asymmetric cumulative dynamic multipliers used in the study also lend credence to the presence of asymmetric structures in the finance-inequality relationship demonstrating the robustness of our estimates. Furthermore, asymmetric causality tests reveal a unidirectional asymmetric causality between positive shocks in financial development and income inequality. The study divulges need to account for asymmetry in finance–inequality which previous studies neglected. National strategies for financial education, financial inclusion for unbanked segments of the population by expanding financial services network to hitherto unbanked areas, tailoring of financial products and services as per the specific needs of people, reducing interest rates on loans to businesses that qualify as small and medium enterprises must be among the top priorities of policy makers.

Keywords: Financial development; Income inequality; NARDL; Asymmetric causality; India (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1703494923000531
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:joecas:v:28:y:2023:i:c:s1703494923000531

DOI: 10.1016/j.jeca.2023.e00341

Access Statistics for this article

The Journal of Economic Asymmetries is currently edited by A.G. Malliaris

More articles in The Journal of Economic Asymmetries from Elsevier
Bibliographic data for series maintained by Catherine Liu ().