Faculty of Business Seminar Series / Berrak Bahadır

Date: Dec 25, 2019 - Wednesday
Time: 10:00-11:30
Place: AB2, Meeting Room 345

Title: Household Debt, Consumption and Inequality

Abstract: This paper examines the potential link between household credit shocks and income inequality at the national level. For a sample of 32 developed and developing coun-tries, we show that aggregate consumption temporarily increases in the short run and decreases in the long run in the face of credit shocks, and that this dynamic response is larger in absolute value, in the short and long run, for countries with high income inequality compared to those with low income equality. We develop a simple dynamic theoretical model, based on binding credit constraints, to illustrate the model's mechanisms.