Inequality, Leverage and Crises
The paper studies how high leverage and crises can arise as a result of changes in the income distribution. Empirically, the periods 1920-1929 and 1983-2008 both exhibited a large increase in the income share of the rich, a large increase in leverage for the remainder, and an eventual financial and...
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Format: | eBook |
Language: | English |
Published: |
Washington, D.C.
International Monetary Fund
2010
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Series: | IMF Working Papers
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Online Access: | |
Collection: | International Monetary Fund - Collection details see MPG.ReNa |
Summary: | The paper studies how high leverage and crises can arise as a result of changes in the income distribution. Empirically, the periods 1920-1929 and 1983-2008 both exhibited a large increase in the income share of the rich, a large increase in leverage for the remainder, and an eventual financial and real crisis. The paper presents a theoretical model where these features arise endogenously as a result of a shift in bargaining powers over incomes. A financial crisis can reduce leverage if it is very large and not accompanied by a real contraction. But restoration of the lower income group's bargaining power is more effective |
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Physical Description: | 37 pages |
ISBN: | 9781455210756 |