Macroprudential policies and income inequality in former transition economies

Konstantinou, Panagiotis; Ρίζος, Αναστάσιος; Stratopoulou, Artemis

doi:10.1007/s10644-021-09333-9

Cited by 11 publications

(8 citation statements)

References 43 publications

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“…They found that limitations on LVT ratios can lower wealth inequality by making mortgages harder for households to obtain, leading to lower indebtedness. Konstantinou et al (2021) found that macroprudential policies can exacerbate income disparity, depending on financial growth and globalization. Low levels of openness and financial development can aggravate inequality.…”

Section: The Impact Of Macroprudential Policies On Income Inequalitymentioning

confidence: 99%

“…Second, macroprudential policies can influence the macroeconomic environment in which government expenditure occurs, contributing to financial stability and reducing the likelihood of economic downturns. Third, macroprudential policies can influence the funding sources of government expenditure, promoting financial stability and reducing financial institution vulnerability, allowing governments to access more stable and lower-cost financing (Zinman, 2010;Acharya et al, 2020;Konstantinou et al, 2021) Macroprudential policy regimes and government expenditure are intertwined factors that impact income inequality. Understanding these interactions can help policymakers design more effective and targeted policies that promote financial stability and equal income distribution.…”

Section: Introductionmentioning

confidence: 99%

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The nonlinear dynamic effect of government expenditure on income inequality: The case of macroprudential policy switching

Zungu

2024

J. Infras. Policy. Dev.

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A panel data analysis of nonlinear government expenditure and income inequality dynamics in a macroprudential policy regime was conducted on a panel of 15 emerging countries from 1985–2019, where there had been a non-prudential regime from 1985–1999 and a prudential regime from 2000–2019. The paper explored the validity of the nonlinearity between government expenditure and income inequality in the macroprudential policy regime as well as the threshold level at which excessive spending reduces income inequality using the Bayesian spatial lag panel smooth transition regression (BSPSTR) and fix effect models. The BSPSTR model was adopted due to its ability to address the problems of heterogeneity, endogeneity, and cross-section correlation in a nonlinear framework. Moreover, as the transition variable often varies across time and space, the effect of the independent variables can also be time- and space-varying. The results reveal evidence of a nonlinear effect between government spending and income inequality, where the minimum level of government spending is found to be 29.89 percent of GDP, above which expenditure reduces inequality in emerging countries. The findings confirmed an inverted U-shaped relationship. The focal policy recommendation is that fiscal policy decisions that will reinforce the need for more emphasis on education and public expenditure on education and health, as important tools for improving income inequality, are crucial for these economies. Caution is needed when introducing macroprudential policies, especially at a low level of government expenditure.

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Section: The Impact Of Macroprudential Policies On Income Inequalitymentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The nonlinear dynamic effect of government expenditure on income inequality: The case of macroprudential policy switching

Zungu

2024

J. Infras. Policy. Dev.

View full text Add to dashboard Cite

show abstract

“…The U-shape relationship, which was first demonstrated by Savvidesa and Stengos [8], was further supported by the study documented by in a panel of 162 countries, covering the period 1960-2011. The study by Chiu and Lee [5], investigated the Kuznets hypothesis in a panel of 59 countries over the period 1985-2015, where these countries were classified into lowincome (27) and high-income (32) countries. Their discovery made a significant contribution to the literature because it demonstrated that the Kuznets hypothesis holds true for low-income countries, while a U-shape explains the relationship in high-income countries.…”

Section: Empirical Reviewmentioning

confidence: 99%

“…The empirical research on the distributional impact of macroprudential policies indicates that the increased adoption of these regulations increases income inequality. There are seven significant empirical papers in the literature that explore the impact of macroprudential regulations on inequality [23][24][25][26][27][28][29][30]. These studies have adopted the borrower-related instruments, such as the loan-to-value limit and debt-to-income ratio.…”

Section: Empirical Reviewmentioning

confidence: 99%

“…The study by Frost and van Stralen [26] further adopted the concentration and interbank exposure limits in their model, and this was found to increase inequality. However, the studies by Carpantier et al [25] and Konstantinou et al [27] argue that these macroprudential policies, through these measures, are helpful in reducing income inequality.…”

Section: Empirical Reviewmentioning

confidence: 99%

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The Nonlinear Dynamic Impact of Development-Inequality in the Prudential Policy Regime in Emerging Economies: A Bayesian Spatial Lag Panel Smooth Transition Regression Approach

Zungu¹,

Nkomo²,

Makhoba³

et al. 2023

Global Market and Trade

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A panel data analysis of the nonlinear dynamics of economic-development in a macroprudential policy regime was conducted in a panel of 25 emerging markets who were grouped together based on their regions: 10 African countries, 8 Asian countries, and 7 European countries covering the period 2000–2019. The paper explored the validity of the Kuznets hypothesis in a prudential policy regime as well as the threshold level at which economic-development reduces inequality, using the Bayesian Spatial Lag Panel Smooth Transition Regression model. This model was adopted due to its ability to address the problems of endogeneity, heterogeneity, and time and spatial-varying in a nonlinear framework. We found evidence of a non-linear effect between the two variables, where the threshold was found to be US$15,900, above which reduces inequality in the African emerging markets; while for emerging Asian and emerging European markets, we documented a U-shape relationship with an optimal level of economic-development estimated at US$17,078 and US$19,000, respectively. Unconventional and macroprudential policies were found to trigger development-inequality relationships. The result supported the S-curve relationship in these regions. Our evidence largely suggests that policymakers ought to formulate policies aiming at increasing agricultural productivity through land redistribution, investment, trade, and promoting human development. Policymakers should also be cautious when implementing macroprudential and unconventional monetary policies.

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Different experiences of Asian emerging‐market economies in the two major financial crises

Lei

Zhao

et al. 2023

Int. J Fin Econ

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This paper studies 10 Asian economies' experiences during two episodes of financial crises in 1997–08 and 2007–09. Our analysis of five crisis‐hit Asian countries shows that overinvestment via credit expansion and foreign financing has an adverse effect on banking sectors while income inequality contributes significantly to financial distress. With five no‐crisis emerging markets included in our Asia analysis, we find that export‐oriented growth backed up by domestic savings is financially less risky than investment‐led growth facilitated by capital inflows. Since such different strategies of output growth to deal with falling demand are related ultimately to the same factor–rising inequality, this distributional problem must be overcome effectively to enhance financial stability and ensure growth sustainability.

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Macroprudential policies and income inequality in former transition economies

Cited by 11 publications

References 43 publications

The nonlinear dynamic effect of government expenditure on income inequality: The case of macroprudential policy switching

The nonlinear dynamic effect of government expenditure on income inequality: The case of macroprudential policy switching

The Nonlinear Dynamic Impact of Development-Inequality in the Prudential Policy Regime in Emerging Economies: A Bayesian Spatial Lag Panel Smooth Transition Regression Approach

Different experiences of Asian emerging‐market economies in the two major financial crises

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