This paper uses state-level data to test the Rajan hypothesis, from his book Fault Lines, that an increase in inequality can lead to a credit boom. Using dynamic heterogeneous panel estimation methods (i.e. MG, PMG, DFE), we find a significant negative long-run relationship between inequality and real estate lending across U.S. states. In addition, we find evidence indicating that the path of causality runs from inequality to credit.
Author: | Steven; Makram , Yamarik; El Shagi |
Volume: | 2016.01 |
Publisher: | INFER |
Year: | 2016 |
No. of pages: | 15 |
Category: |