Document Type
Article
Publication Date
6-27-2018
Journal / Book Title
Risks
Abstract
We investigate masked financial instability caused by wealth inequality. When an economic sector is decomposed into two subsectors that possess a severe wealth inequality, the sector in entirety can look financially stable while the two subsectors possess extreme financially instabilities of opposite nature, one from excessive equity, the other from lack thereof. The unstable subsector can result in further financial distress and even trigger a financial crisis. The market instability indicator, an early warning system derived from dynamical systems applied to agent-based models, is used to analyze the subsectoral financial instabilities. Detailed mathematical analysis is provided to explain what financial instabilities can arise amid seemingly stable economy and positive market data. The theoretical conjecture is verified by historical macroeconomic time series of the United States households among whom a substantial wealth inequality has been officially confirmed.
DOI
https://doi.org/10.3390/risks6030065
MSU Digital Commons Citation
Choi, Youngna, "Masked Instability: Within-Sector Financial Risk in the Presence of Wealth Inequality" (2018). Department of Applied Mathematics and Statistics Faculty Scholarship and Creative Works. 145.
https://digitalcommons.montclair.edu/appliedmath-stats-facpubs/145
Published Citation
Choi, Youngna. "Masked instability: Within-sector financial risk in the presence of wealth inequality." Risks 6, no. 3 (2018): 65.
Included in
Accounting Commons, Analysis Commons, Applied Statistics Commons, Control Theory Commons, Dynamical Systems Commons, Dynamic Systems Commons, Finance and Financial Management Commons, Management Sciences and Quantitative Methods Commons, Number Theory Commons, Numerical Analysis and Computation Commons, Ordinary Differential Equations and Applied Dynamics Commons, Other Physical Sciences and Mathematics Commons, Partial Differential Equations Commons, Special Functions Commons