Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/207755 
Year of Publication: 
2019
Series/Report no.: 
NBB Working Paper No. 375
Publisher: 
National Bank of Belgium, Brussels
Abstract: 
I investigate the effect of rising income inequality on the natural rate of interest in an economy with "rich" households with preferences over wealth and "non-rich" households, a housing market and credit market frictions. Simulating the increase in interpersonal and functional income inequality over the 1981-2016 period replicates the downward trend in the natural rate of interest estimated by Laubach and Williams (2016), most of the increase in the debt-to-income ratio of the bottom 90 % of households and the upward trend in house prices observed during this period.
Subjects: 
Income inequality
natural rate of interest
secular stagnation
JEL: 
E25
E52
E43
D14
Document Type: 
Working Paper

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