Publication Date

January 2000

Publication Details

Levy, A, A Note on Income Inequality and Macro-economic Volatility, Working Paper 00-08, Department of Economics, University of Wollongong, 2000.


Income inequality may influence macro-economic variables by affecting the money multiplier and the trade-off between inflation and output. In an AD-AS model with imperfect foresight income inequality intensifies the volatility of output and inflation rate by increasing the likelihood of oscillations as well as their magnitude. Volatility is, however, moderated when income inequality prolongs the business cycles.