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dc.contributor.authorAl-Hussami, Faresen_US
dc.contributor.authorRemesal, Álvaro Martínen_US
dc.description.abstractIn this paper we analyze theoretically and empirically the impact of an increase in income inequality on the current account balance. We develop a model with consumption externalities and heterogeneous agents which explains how an increase in income inequality can affect negatively or positively the current account balance. The relationship is exacerbated by the level of financial liberalization represented by changes in the borrowing constraints. Panel data regressions for a sample of developed and developing economies confirm that an increase in income inequality is mostly linked to a decrease in the current account balance. Moreover, we also find that relatively higher levels of financial liberalization interact with the level of income inequality so that the previous effect is amplified. These results are robust to different specifications.en_US
dc.publisherKiel Institute for the World Economy (IfW) Kielen_US
dc.relation.ispartofseriesKiel advanced studies Working Papers 459en_US
dc.subject.keywordcurrent accounten_US
dc.subject.keywordincome inequalityen_US
dc.subject.keywordglobal imbalancesen_US
dc.subject.keywordfinancial liberalizationen_US
dc.subject.keywordconsumption externalitiesen_US
dc.titleCurrent account imbalances and income inequality: Theory and evidenceen_US
dc.typeWorking Paperen_US
Appears in Collections:Kiel Advanced Studies Working Papers, IfW
Publikationen von Forscherinnen und Forschern des IfW

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