Household Debt, Consumption, and Income Inequality

Edmond Berisha, John Meszaros

Research output: Contribution to journalArticleResearchpeer-review

Abstract

Using the Johansen and Engle–Granger cointegration tests, we show that there is one cointegrating relationship between household debt, consumption, and income inequality in the United States for the period from 1929 to 2009. Given this result, we use a Vector Error-Correction model to further understand the dynamics among the three variables. Results indicate that increases in income inequality and consumption directly contribute to increases in household debt. Interestingly, the results reveal some feedback from household debt to income inequality. We also show that debt-driven consumption should be viewed with caution as the results show that increases in household debt correspond with future declines in the rate of consumption.

Original languageEnglish
Pages (from-to)161-176
Number of pages16
JournalInternational Economic Journal
Volume32
Issue number2
DOIs
StatePublished - 3 Apr 2018

Fingerprint

Household debt
Income inequality
Consumption inequality
Vector error correction model
Cointegration test
Debt

Keywords

  • Income inequality
  • VECM
  • consumption
  • household debt

Cite this

Berisha, Edmond ; Meszaros, John. / Household Debt, Consumption, and Income Inequality. In: International Economic Journal. 2018 ; Vol. 32, No. 2. pp. 161-176.
@article{4ff725cf273740b5aee73d4e879b2ade,
title = "Household Debt, Consumption, and Income Inequality",
abstract = "Using the Johansen and Engle–Granger cointegration tests, we show that there is one cointegrating relationship between household debt, consumption, and income inequality in the United States for the period from 1929 to 2009. Given this result, we use a Vector Error-Correction model to further understand the dynamics among the three variables. Results indicate that increases in income inequality and consumption directly contribute to increases in household debt. Interestingly, the results reveal some feedback from household debt to income inequality. We also show that debt-driven consumption should be viewed with caution as the results show that increases in household debt correspond with future declines in the rate of consumption.",
keywords = "Income inequality, VECM, consumption, household debt",
author = "Edmond Berisha and John Meszaros",
year = "2018",
month = "4",
day = "3",
doi = "10.1080/10168737.2018.1481874",
language = "English",
volume = "32",
pages = "161--176",
journal = "International Economic Journal",
issn = "1016-8737",
publisher = "Taylor and Francis Ltd.",
number = "2",

}

Household Debt, Consumption, and Income Inequality. / Berisha, Edmond; Meszaros, John.

In: International Economic Journal, Vol. 32, No. 2, 03.04.2018, p. 161-176.

Research output: Contribution to journalArticleResearchpeer-review

TY - JOUR

T1 - Household Debt, Consumption, and Income Inequality

AU - Berisha, Edmond

AU - Meszaros, John

PY - 2018/4/3

Y1 - 2018/4/3

N2 - Using the Johansen and Engle–Granger cointegration tests, we show that there is one cointegrating relationship between household debt, consumption, and income inequality in the United States for the period from 1929 to 2009. Given this result, we use a Vector Error-Correction model to further understand the dynamics among the three variables. Results indicate that increases in income inequality and consumption directly contribute to increases in household debt. Interestingly, the results reveal some feedback from household debt to income inequality. We also show that debt-driven consumption should be viewed with caution as the results show that increases in household debt correspond with future declines in the rate of consumption.

AB - Using the Johansen and Engle–Granger cointegration tests, we show that there is one cointegrating relationship between household debt, consumption, and income inequality in the United States for the period from 1929 to 2009. Given this result, we use a Vector Error-Correction model to further understand the dynamics among the three variables. Results indicate that increases in income inequality and consumption directly contribute to increases in household debt. Interestingly, the results reveal some feedback from household debt to income inequality. We also show that debt-driven consumption should be viewed with caution as the results show that increases in household debt correspond with future declines in the rate of consumption.

KW - Income inequality

KW - VECM

KW - consumption

KW - household debt

UR - http://www.scopus.com/inward/record.url?scp=85048077105&partnerID=8YFLogxK

U2 - 10.1080/10168737.2018.1481874

DO - 10.1080/10168737.2018.1481874

M3 - Article

VL - 32

SP - 161

EP - 176

JO - International Economic Journal

JF - International Economic Journal

SN - 1016-8737

IS - 2

ER -