Inequality exacerbates crises in several ways, Fed research finds
High-income households have a high tolerance for risk, which boosts the non-bank sector
Inequality may exacerbate financial vulnerabilities through various channels, researchers with the Federal Reserve Board find in new research.
“Inequality is associated with different financial sector vulnerabilities,” Anni Isojaervi and Sam Jerow say in the paper.
Inequality may cause income to stagnate, encouraging low-income households to seek credit. Inequality creates greater demand for riskier assets, as richer households have a higher risk tolerance. And, the authors say, higher savings
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