Inequality Indebtedness and Financial Crises

Antonio Scognamillo

Working Papers - Economics from Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa

Abstract: This work is an empirical contribution that investigates the presence of a relationship among income inequality, household indebtedness and the erup- tion of systemic banking crises (namely the I-I-C nexus). We test this hy- pothesis on a panel of 31 countries over the period 1980-2012 within four different scenarios. We find strong evidence of a statistically significant asso- ciation between income inequality and systemic banking crises via household indebtedness (the I-I-C nexus) regardless of the specification and the estima- tion technique chosen. However, we find no evidence of a feedback effect of a systemic banking crisis on income inequality, at least in the short run. We also find that economies characterized by highly liberalized financial mar- kets are more prone to experience such a nexus. These results suggest that reforming the architecture of financial regulation and supervision is still an important issues. However, it is a necessary but not sufficient condition in order to ensure financial stability.

Keywords: Inequality; Indebtedness; Financial; crisis; Financial; Regulation (search for similar items in EconPapers)
JEL-codes: D30 F38 F62 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2015
New Economics Papers: this item is included in nep-ban
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