Inequality, Credit, and Housing: A Mechanism to Explain Financial Crises?
Public Deposited- Last Modified
- February 26, 2019
- Creator
-
Contarino, Alexander
- Affiliation: College of Arts and Sciences, Department of Economics
- Abstract
- This paper analyzes the effects of lagged changes in income inequality on credit growth and changes in housing prices. The theoretical model developed herein, borrowed heavily from Bengui and Phan (2016), predicts that growing income inequality should lead to credit growth and positive changes in housing prices. Using a panel dataset spanning 14 developed countries over 130 years, this model is tested empirically by applying first-difference ordinary least squares regressions with year and country fixed effects, as well as with lagged values for key predictive variables. The results indicate that income inequality is insignificant in predicting credit growth. However, lagged income inequality is significant in predicting changes in housing prices. Over the full sample, the fourth lag has a significantly positive coefficient. This result is robust through a battery of checks. The finding thus provides evidence for the hypothesis that growing inequality is associated with growing housing prices.
- Date of publication
- spring 2017
- Keyword
- DOI
- Resource type
- Rights statement
- In Copyright
- Note
- Funding: None
- Advisor
- Phan, Toan
- Degree
- Bachelor of Arts
- Academic concentration
- Economics
- Honors level
- Honors
- Degree granting institution
- University of North Carolina at Chapel Hill
- Graduation year
- 2017
- Language
- English
Relations
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This work has no parents.
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