The Circular Relationship between Inequality, Leverage, and Financial Crises: Intertwined Mechanisms and Competing Evidence

Abstract

The financial crisis of 2007-2008 renewed interest around the finance-nexus inequality, when some, like Rajan (2010), pointed at growing inequality as the main determinant of the credit bubble. Various, intertwined influences underlie the two-way relationship between inequality and finance. The literature finds evidence of a positive causal relationship from inequality to credit, but cofounding factors are also certainly at play. Credit booms appear to be the main determinant of financial crises. Distributional impact of financial dynamics are less clear, but a majority of studies conclude to an increase of inequality following a financial crisis.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 11 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.