Inequality and exchange rate movements in an open-economy macroeconomic model

Carnevali, Emilio, Ruggeri, Francesco and Passarella, Marco Veronese (2022) Inequality and exchange rate movements in an open-economy macroeconomic model. Review of Political Economy. ISSN 0953-8259 (In Press)

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This article presents a complete macroeconomic (SFC) model to study income and wealth distribution in an open economy. We argue that exchange rates and the stock of foreign debt play a major role in shaping inequality across and within countries. Using the ‘relative income hypothesis’, we show that debt-financed consumption of low-income households can affect both total income and the disposable income of high-income households in the medium run. In addition, while higher inequality is detrimental to the domestic economy, it can benefit trading partners.

Item Type: Article
Uncontrolled Keywords: Open economy, foreign investments, inequality, stock-flow consistency
Subjects: L100 Economics
L200 Politics
Department: Faculties > Business and Law > Newcastle Business School > Accounting and Finance
Depositing User: Elena Carlaw
Date Deposited: 31 May 2022 08:42
Last Modified: 23 Dec 2023 08:01

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