Financial crisis and inequality in Hungary

István Kónya

No 2132, CERS-IE WORKING PAPERS from Institute of Economics, Centre for Economic and Regional Studies

Abstract: The goal of this paper is to analyze the connections Hungarian income and wealth distribution on the one hand, and the macroeconomics impacts of the global financial crisis of 2007-2008 on the other hand. To do this, I build a heterogenous agent, dynamic, general equilibrium model, which I calibrate using Hungarian income distribution data before the crisis. The model is then used to study both the impact of the financial crisis on income and wealth inequality, and the role of income and wealth inequality in the macroeconomic developments after the crisis. Results indicate that (i) the long-run capital stock rises, and the interest rate falls, but the effect is quantitatively small; (ii) the long-run income and wealth distributions only change moderately; and (iii) the short-run consumption response of low-wealth household is very strong, and drives a sizable aggregate consumption drop as well.

Keywords: heterogeneity; income shocks; simulations; borrowing constraint (search for similar items in EconPapers)
JEL-codes: C63 E21 E44 E47 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2021-08
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Persistent link: https://EconPapers.repec.org/RePEc:has:discpr:2132

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