Income inequality, current account, and financial risk: a mediation analysis for Asia

Qingbin Zhao, Nian Liu, Chunyu Lei and Xinhua Gu

Applied Economics Letters, 2025, vol. 32, issue 8, 1139-1143

Abstract: This paper provides a mediation analysis for the effect of income inequality on the risk of financial crisis. We find that inequality affects risk mostly through current account imbalances, whether deficits or surpluses. The policy implication is that financial stability can be effectively strengthened under lower income inequality and healthier current accounts.

Date: 2025
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DOI: 10.1080/13504851.2024.2302866

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