Volatility widens inequality. Could aid and remittances help?

Chauvet, Lisa; Ferry, Marin; Guillaumont, Patrick; Jeanneney, Sylviane Guillaumont; Tapsoba, Sampawende; Wagner, L

doi:10.1007/s10290-018-0331-7

Cited by 26 publications

(26 citation statements)

References 36 publications

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“…However, this approach relies on strong assumptions regarding the functional form of the long-term component. Following Kpodar and Imam (2016) and Chauvet et al (2018), we use instead a more flexible approach, assuming that the long-term component follows an AR (1) process with a trend as follows:…”

Section: B Model Specificationmentioning

confidence: 99%

Financial Deepening, Terms of Trade Shocks, and Growth Volatility in Low-Income Countries

Kpodar

Goff²,

Singh³

2019

IMF Working Papers

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This paper contributes to the literature by looking at the possible relevance of the structure of the financial system-whether financial intermediation is performed through banks or markets-for macroeconomic volatility, against the backdrop of increased policy attention on strengthening growth resilience. With low-income countries (LICs) being the most vulnerable to large and frequent terms of trade shocks, the paper focuses on a sample of 38 LICs over the period 1978-2012 and finds that banking sector development acts as a shock-absorber in poor countries, dampening the transmission of terms of trade shocks to growth volatility. Expanding the sample to 121 developing countries confirms this result, although this role of shock-absorber fades away as economies grow richer. Stock market development, by contrast, appears neither to be a shock-absorber nor a shock-amplifier for most economies. These findings are consistent across a range of econometric estimators, including fixed effect, system GMM and local projection estimates.

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Section: B Model Specificationmentioning

confidence: 99%

Financial Deepening, Terms of Trade Shocks, and Growth Volatility in Low-Income Countries

Kpodar

Goff²,

Singh³

2019

IMF Working Papers

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“…Calderón and Yeyati (2009) 1945-2004, Huang et al (2015 find robust results that larger growth volatility positively and significantly associates with higher income inequality. Chauvet et al (2017) also examine the relationship between income volatility and inequality, considering aid and remittances. The authors employ a panel of 142 countries over 1973-2012 and find that volatility increases inequality, where lower income groups are most exposed to the volatility.…”

Section: Introductionmentioning

confidence: 99%

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

et al. 2018

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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.

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“…In addition, however, the impact of portfolio flows is likely to reflect their implications for aggregate volatility. Several studies find pronounced negative distributional consequences when capital account liberalization increases macroeconomic volatility (Chauvet et al 2017) and especially when it is followed by a crisis (Ernst and Escudero 2008;Furceri et al 2018) (Figure 8). 32,33,34 27 A few well-known tax havens host the vast majority of the world's FDI through special purpose entities.…”

Section: Non-fdi Private Capital Flows 31mentioning

confidence: 99%

“…Portfolio debt flows include flows where the debtor is government and the creditor is private sector entity as these flows are considered market-driven. 32 Specifically, Chauvet et al (2017) finds that income volatility has an adverse impact on inequality for a panel of 142 countries between 1973 and 2012. Ernst and Escudero (2008) finds the inequality-raising impact of crisis in a sample of 102 countries between 1960-2006, while Furceri et al (2018) examining a sample of 23 countries over the period 1975-2010 show that the distributional impact of capital account liberalization is magnified when liberalization is followed by crisis.…”

Section: Non-fdi Private Capital Flows 31mentioning

confidence: 99%

Financial Globalization and Inequality

Eichengreen¹,

Csonto²,

El-Ganainy³

et al. 2021

IMF Working Papers

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We review the debate on the association of financial globalization with inequality. We show that the within-country distributional impact of capital account liberalization is context specific and that different types of flows have different distributional effects. Their overall impact depends on the composition of capital flows, their interaction, and on broader economic and institutional conditions. A comprehensive set of policies – macroeconomic, financial and labor- and product-market specific – is important for facilitating wider sharing of the benefits of financial globalization.

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Volatility widens inequality. Could aid and remittances help?

Cited by 26 publications

References 36 publications

Financial Deepening, Terms of Trade Shocks, and Growth Volatility in Low-Income Countries

Financial Deepening, Terms of Trade Shocks, and Growth Volatility in Low-Income Countries

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

Financial Globalization and Inequality

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