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Cover Art
Author Ranciere, Romain.

Title Income Inequality and Current Account Imbalances [electronic resource] / Romain Ranciere.

Published Washington, D.C. : International Monetary Fund, 2012.


Location Call No. Status
Physical description 1 online resource (44 p.)
Series IMF Working Papers; Working Paper ; No. 12/8
IMF Working Papers; Working Paper ; No. 12/8
Summary This paper studies the empirical and theoretical link between increases in income inequality and increases in current account deficits. Cross-sectional econometric evidence shows that higher top income shares, and also financial liberalization, which is a common policy response to increases in income inequality, are associated with substantially larger external deficits. To study this mechanism we develop a DSGE model that features workers whose income share declines at the expense of investors. Loans to workers from domestic and foreign investors support aggregate demand and result in current account deficits. Financial liberalization helps workers smooth consumption, but at the cost of higher household debt and larger current account deficits. In emerging markets, workers cannot borrow from investors, who instead deploy their surplus funds abroad, leading to current account surpluses instead of deficits.
Notes Description based on print version record.
Other author Kumhof, Michael.
Lebarz, Claire.
Ranciere, Romain.
Richter, Alexander W.
Throckmorton, Nathaniel A.
Subject Current Account Balance
Current Account Deficit
Current Account Imbalances
Current Account
Financial Liberalization
Income Inequality
ISBN 1463930577 : 18.00 USD
ISSN 1018-5941
Standard Number 10.5089/9781463930578.001