Policy Study
10/08/2016
Based on the existing literature, this paper aims at examining the two-way relationship between inequality and finance. Concerning the nexus inequality – finance, we find evidence supporting a direct causal link (a rise of credit demand as a result of high inequalities), and an indirect one (accommodative monetary policy and financial deregulation increasing credit supply, as a result of high inequalities); coincident factors (financial deregulation increasing simultaneously both inequalities and leverage) are not to be excluded either. We also report evidence showing the impact of financial development, financial deregulation and financial crises on income distribution. Despite the complexity of these various, intertwined linkages, the presumptions of a circular, self-reinforcing relationship between finance and inequalities are very strong, requiring urgent, adequate policy responses.
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In an article in Delo, László Andor criticises Viktor Orbán government's economic policies, such as not allowing Hungary to join the euro area, which he believes would have helped curb inflation. He also criticises the government for blaming external enemies such as the President of the European Commission, to cover up its own failures.