Economy
Too Much Finance Can Make Inequality Worse: IMF Researchers
(Bloomberg) –The expansion of financial services in an economy can reduce income inequality — but beyond a certain point it tends to have the opposite effect, according to the International Monetary Fund.
Better access to banking and credit can help close income gaps by allowing people to save and invest more, the Washington-based fund said Friday in a staff discussion note by authors including Martin Cihak and Ratna Sahay. But once the financial sector surpasses a certain size threshold relative to the economy, its growth typically exacerbates inequality, the study said.
Bigger income disparities are “associated with greater financial risks,” it said, and they “tend to be accompanied by higher growth in credit.” The Fund cited the example of the U.S., where too much credit — including to lower-income households — contributed to the 2008 crash. And it said that “crises, in turn, lead to higher default rates, making lower-income households worse off.”
Income inequality has emerged as one of the major economic problems of the era. Democratic presidential candidates in the U.S. have put the issue at the center of their campaigns, and it’s contributed to violent protests from Latin America to the Middle East.
The IMF study also found that inequality tends to fall further when women gain greater access to financial services. And it said that good regulation is key to “reining in excessive growth of the financial sector.”
-
Alamaliktistaad Magazines2 months ago
Al-iktisaad, October 24
-
OER Magazines2 months ago
Signature, October 24
-
Magazines2 months ago
OER, October 24
-
Oman1 month ago
Shell Oman Partners with Oneroad Automotive Gives Away 2 Forthing Cars as Part of its ‘Win Big’ Campaign
-
Alamaliktistaad Magazines4 weeks ago
Al-iktisaad, November 24
-
Energy3 weeks ago
OUTLOOK: Emerging Markets and Renewables – The Twin Engines of Energy Growth for 2025
-
News4 weeks ago
Mitsubishi X-force Joins Sayarti’s Fleet: A New Era of Elegance and Performance
-
Energy3 weeks ago
Oman and Belgium Strengthen Green Hydrogen Partnership with New Landmark Agreement