Household Debt, Consumption and Inequality
Kuhelika De () and
William Lastrapes ()
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Kuhelika De: Department of Economics, Grand Valley State University
No 2011, Working Papers from Florida International University, Department of Economics
This paper examines the link between household credit shocks, consumption and income inequality at the national level. Empirically, we use country-speciï¬ c VAR models to estimate the dynamic responses of aggregate consumption to household credit shocks. We then show in cross-country regressions that the consumption response is more sensitive to such shocks in countries with higher levels of inequality, even after controlling for ï¬ nancial development. Theoretically, we construct and simulate a dynamic model based on the eï¬€ect of inequality on the incidence of credit constraints, to illustrate potential causal mechanisms.
Keywords: credit constraints; credit shocks; income distribution; VAR; Gini coefficient; local projections (search for similar items in EconPapers)
JEL-codes: E21 E32 E44 E51 (search for similar items in EconPapers)
Pages: 49 pages
New Economics Papers: this item is included in nep-fdg and nep-mac
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Journal Article: Household debt, consumption and inequality (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:fiu:wpaper:2011
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