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Growth Volatility and Inequality in the U.S.: A Wavelet Analysis

Shinhye Chang, Rangan Gupta (), Stephen Miller () and Mark Wohar ()
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Shinhye Chang: University of Pretoria

No 2018-05, Working papers from University of Connecticut, Department of Economics

Abstract: This study applies wavelet coherency analysis to explore the relationship between the U.S. economic growth volatility, and income and wealth inequality measures over the period 1917 to 2015 and 1962 to 2014. We consider the relationship between output volatility during positive and negative growth scenarios. Wavelet analysis simultaneously examines the correlation and causality between two series in both the time and frequency domains. Our findings provide evidence of positive correlation between the volatility and inequality across high (short-run)- and low-frequencies (long-run). The direction of causality varies across frequencies and time. Strong evidence exists that volatilities lead inequality at low-frequencies across income inequality measures from 1917 to 1997. After 1997, however, the direction of causality changes. In the time-domain, the time-varying nature of long-run causalities implies structural changes in the two series. These findings provide a more thorough picture of the relationship between the U.S. growth volatility and inequality measures over time and frequency domains, suggesting important implications for policy makers.

Keywords: Growth volatility; Income and Wealth Inequalities; Wavelet analysis (search for similar items in EconPapers)
JEL-codes: C49 O15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-gro and nep-his
Date: 2018-06
Note: Stephen Miller is the corresponding author
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Related works:
Journal Article: Growth volatility and inequality in the U.S.: A wavelet analysis (2019) Downloads
Working Paper: Growth Volatility and Inequality in the U.S.: A Wavelet Analysis (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:uct:uconnp:2018-05

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