posted on 2019-03-28, 11:39authored byShinhye Chang, Rangan Gupta, Stephen M. Miller, Mark Wohar
This study applies wavelet coherency analysis to explore the relationship between the U.S. economic growth volatility, and income and wealth inequality measures over the period 1917 to 2015 and 1962 to 2014. We consider the relationship between output volatility during positive and negative growth scenarios. Wavelet analysis simultaneously examines the correlation and causality between two series in both the time and frequency domains. Our findings provide evidence of positive correlation between the volatility and inequality across high (short-run)- and low-frequencies (long-run). The direction of causality varies across frequencies and time. Strong evidence exists that volatilities lead inequality at low-frequencies across income inequality measures from 1917 to 1997. After 1997, however, the direction of causality changes. In the time-domain, the time-varying nature of long-run causalities implies structural changes in the two series. These findings provide a more thorough picture of the relationship between the U.S. growth volatility and inequality measures over time and frequency domains, suggesting important implications for policy makers.
History
School
Business and Economics
Department
Business
Published in
Physica A: Statistical Mechanics and its Applications
Volume
521
Pages
48 - 73
Citation
CHANG, S. ... et al, 2019. Growth volatility and inequality in the U.S.: A wavelet analysis. Physica A: Statistical Mechanics and its Applications, 521, pp.48-73.
This paper was accepted for publication in the journal Physica A: Statistical Mechanics and its Applications and the definitive published version is available at https://doi.org/10.1016/j.physa.2019.01.024.