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2019 | OriginalPaper | Chapter

11. Does Price Stability Impact the Link Between Income Inequality and Consumption Inequality?

Authors : Eliphas Ndou, Thabo Mokoena

Published in: Inequality, Output-Inflation Trade-Off and Economic Policy Uncertainty

Publisher: Springer International Publishing

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Abstract

Evidence reveals that consumption inequality rises significantly to positive income inequality shocks. A counterfactual VAR analysis indicates that high inflation amplifies the increase in consumption inequality to positive income inequality shocks when inflation exceeds the 6 % threshold. In addition, evidence reveals that low inflation dampens the increase in consumption inequality when inflation is below the 6 % threshold. This evidence reveals that price stability matters. Therefore, policymakers should enforce price stability to weaken the link between the income inequality and consumption inequality.

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previous chapter Does the Consumption Inequality Channel Impact the Transmission of Positive Income Inequality Shocks to Credit Dynamics in South Africa? Insights Before 2009Q1
next chapter Do Positive Excess Capital Adequacy Ratio Shocks Influence the Income Inequality Dynamics in South Africa?
Literature
Aguiar, M., & Bils, M. (2011). Has consumption inequality mirrored income inequality (NBER working section number 16807).
Attanasio, O., Hurst, E., & Pistaferri, L. (2012). The evolution of income, consumption and leisure inequality in the US, 1980–2010 (NBER working section No. 17982).
Hasset, K., & Mathur, A. (2012). A new measure of consumption inequality. American Enterprise Institute.
Krueger, D., & Perri, F. (2005). Does income inequality lead to consumption inequality? Evidence and theory (CFS Working Chapter, No. 2005/15). Goethe University, Center for Financial Studies (CFS).
Meyer, B., & Sullivan, J. (2013). Consumption and income inequality and the great recession. American Economic Review, Sections and Proceedings, 103(3), 178–183.
Sarlo, C. (2016). Consumption inequality in Canada? Is the gap growing? Fraser Institute.
Metadata
Title
Does Price Stability Impact the Link Between Income Inequality and Consumption Inequality?
Authors
Eliphas Ndou
Thabo Mokoena
Copyright Year
2019
Book
Inequality, Output-Inflation Trade-Off and Economic Policy Uncertainty

Print ISBN: 978-3-030-19802-2

Electronic ISBN: 978-3-030-19803-9

Copyright Year: 2019

DOI
https://doi.org/10.1007/978-3-030-19803-9_11