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Inequality, the risk of secular stagnation and the increase in household deb

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  • Ansgar Rannenberg

    (Economics and Research Department, National Bank of Belgium)

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.

Suggested Citation

  • Ansgar Rannenberg, 2019. "Inequality, the risk of secular stagnation and the increase in household deb," Working Paper Research 375, National Bank of Belgium.
    • Handle: RePEc:nbb:reswpp:201908-375
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    Cited by:

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    2. Michele Catalano & Emilia Pezzolla, 2022. "Global natural projections," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 49(4), pages 949-990, November.
    3. Darracq Pariès, Matthieu & Notarpietro, Alessandro & Kilponen, Juha & Papadopoulou, Niki & Zimic, Srečko & Aldama, Pierre & Langenus, Geert & Alvarez, Luis Julian & Lemoine, Matthieu & Angelini, Elena, 2021. "Review of macroeconomic modelling in the Eurosystem: current practices and scope for improvement," Occasional Paper Series 267, European Central Bank.
    4. Acocella, Nicola, 2021. "Stagnation," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 74(2), pages 121-140.

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    More about this item

    Keywords

    Income inequalitynatural rate of interestsecular stagnation;

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance

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