Within-Country Inequality, Global Imbalances and Financial Instability

Research reports and studies
September 2009
Milo Vandemoortele

This paper draws on academic literature and documentation regarding the current debate surrounding the global financial crisis.  It analyses how a combination of wealth inequality within countries and imbalances between countries has contributed to financial instability and the recent crisis. It is structured in five sections. After the introduction, the second section looks at how within-country inequality and polarisation contribute to financial instability. The third section examines the wealth inequality at the global level as a source of financial instability. The fourth section analyses the mutually reinforcing relationship between inequalities (both within and between countries) and how they perpetuate financial instability. The last section concludes and provides possible national and international policy responses to address these inequalities and consequently support a robust recovery from the crisis.

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