Inequality, Leverage, and Crises

Kumhof, Michael; Rancière, Romain

doi:10.1257/aer.20110683

Cited by 499 publications

(412 citation statements)

References 25 publications

(29 reference statements)

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“…This reverse causality could occur if low earning households borrowed more to avoid too large consumption disparities when income inequality is high. This is conjectured by Rajan (2010), Kumhof et al (2015) and van Treeck (2014) consistent with studies using US time series (Pollin, 1988;Christen and Morgan, 2005;Boushey and Weller, 2008). On the other hand, Atkinson and Morelli (2011) and Bordo and Meissner (2012) found no support for this hypothesis after analysing the international experience using case studies and macro-level data.…”

Section: Economic Literaturementioning

confidence: 74%

Finance and Inclusive Growth

Cournède

Denk

Hoeller

2015

OECD Economic Policy Papers

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Section: Economic Literaturementioning

confidence: 74%

Finance and Inclusive Growth

Cournède

Denk

Hoeller

2015

OECD Economic Policy Papers

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“…That financial reforms (FRs) and income distribution interact is straightforward to motivate (e.g., Kumhof and Ranciere (2015); Agnello et al (2012); Claessens and Perotti (2007)). For instance if inequality reflects unequal access to funds by those with poor credit histories or limited collateral, then better functioning, more accessible financial markets might reduce income dispersion.…”

Section: Introductionmentioning

confidence: 99%

Do financial reforms help stabilize inequality?

Christopoulos

McAdam

2017

Journal of International Money and Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe explore the relationship between financial reforms and income inequality using a panel of 29 countries over 1975-2005. We extend panel unit root tests to allow for the presence of some financial-reform covariates and further suggest an associated but novel, semi-parametric approach. Results demonstrate that although both gross and net Gini indices follow a unit root process, this picture can change when financial reform indices are accounted for. In particular, whilst gross Gini coefcients are generally not stabilized by financial reforms, net measures are (more likely to be). Thus financial reforms enacted in the presence of a strong safety net would seem preferable. JEL: C01, C12, D63, G15.

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“…They find that the model can account for Fisher debt deflations, liquidity traps, and support expansionary fiscal policies, as multipliers can be higher than one. Kumhof et al (2015) study the link between rising inequality, household leverage and financial crises employing a DSGE model where top earner households (5% of the income distribution) lend to the bottom ones (95% of the income distribution). They show that an exogenous inequality shock induces low-income households to increase their indebtedness, raising their rational willingness to default and, in turn, the probability of a financial crisis.…”

Section: Recent Developments In Dsge Modeling: Patches or Newmentioning

confidence: 99%

Macroeconomic Policy in DSGE and Agent-Based Models Redux: New Developments and Challenges Ahead

Fagiolo

Roventini

2016

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractThe Great Recession seems to be a natural experiment for economic analysis, in that it has shown the inadequacy of the predominant theoretical framework -the New Neoclassical Synthesis (NNS) -grounded on the DSGE model. In this paper, we present a critical discussion of the theoretical, empirical and political-economy pitfalls of the DSGE-based approach to policy analysis. We suggest that a more fruitful research avenue should escape the strong theoretical requirements of NNS models (e.g., equilibrium, rationality, representative agent, etc.) and consider the economy as a complex evolving system, i.e. as an ecology populated by heterogenous agents, whose far-from-equilibrium interactions continuously change the structure of the system. This is indeed the methodological core of agent-based computational economics (ACE), which is presented in this paper. We also discuss how ACE has been applied to policy analysis issues, and we provide a survey of macroeconomic policy applications (fiscal and monetary policy, bank regulation, labor market structural reforms and climate change interventions). Finally, we conclude by discussing the methodological status of ACE, as well as the problems it raises.

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Inequality, Leverage, and Crises

Cited by 499 publications

References 25 publications

Finance and Inclusive Growth

Finance and Inclusive Growth

Do financial reforms help stabilize inequality?

Macroeconomic Policy in DSGE and Agent-Based Models Redux: New Developments and Challenges Ahead

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