Zungu, L.T.; Greyling, L. The Impact of Restrictive Macroprudential Policies through Borrower-Targeted Instruments on Income Inequality: Evidence from a Bayesian Approach. Economies2024, 12, 256.
Zungu, L.T.; Greyling, L. The Impact of Restrictive Macroprudential Policies through Borrower-Targeted Instruments on Income Inequality: Evidence from a Bayesian Approach. Economies 2024, 12, 256.
Zungu, L.T.; Greyling, L. The Impact of Restrictive Macroprudential Policies through Borrower-Targeted Instruments on Income Inequality: Evidence from a Bayesian Approach. Economies2024, 12, 256.
Zungu, L.T.; Greyling, L. The Impact of Restrictive Macroprudential Policies through Borrower-Targeted Instruments on Income Inequality: Evidence from a Bayesian Approach. Economies 2024, 12, 256.
Abstract
The study used the data from emerging markets to examine the impact of restrictive macroprudential policies on income inequality from 2000–2019 using Bayesian panel vector autoregression and Bayesian panel dynamics generalized method of moments models. The chosen models are suitable for addressing multiple entity dynamics, accommodating a wide range of variables, handling dense parameterization, and optimizing formativeness and heterogeneous individualspecific factors. The empirical analysis utilized various macroprudential policy proxies and income inequality measures. The results show that when the central banks tighten systems using macroprudential policy instruments to sticker debt-to-income and financial instruments for lower-income borrowers (the bottom 40% of the income distribution) promote income inequality in these countries while reducing income inequality for high-income borrowers (the high 1 per-cent of the income distribution). The impact loan-to-value ratios were found to be insignificant in these countries. Fiscal policy through government expenditure and economic development reduces income inequality, while money supply and oil price shocks exacerbate it. The study suggests implementing a progressive debt-to-income (DTI) ratio system in emerging markets to ad-dress income inequality among lower-income borrowers. This would adjust DTI thresholds based on income brackets, allowing lenient credit access for lower-income borrowers while stricter limits for higher-income borrowers. This would improve financial stability and reduce income disparities. Additionally, targeted financial literacy programs and a petroleum-linked basic income program could be implemented to distribute oil revenue to lower-income households. Monetary Supply Stabilization Fund could also be established to maintain financial stability and prevent excessive inflation.
Copyright:
This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
