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Inflation shocks and income inequality: An analysis with genetic algorithms and Bayesian quantile regressions

Rolando Gonzales ( Universitetet i Agder , Kristiansand, Norway)
Andrea Rojas-Hosse ( University College London , London, UK)

African Journal of Economic and Management Studies

ISSN: 2040-0705

Article publication date: 9 April 2019

Issue publication date: 24 May 2019

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Abstract

Purpose

The purpose of this paper is to analyze the effects of inflationary shocks on inequality, using data of selected countries of the Middle East and North Africa (MENA).

Design/methodology/approach

Inflationary shocks were measured as deviations from core inflation, based on a genetic algorithm. Bayesian quantile regression was used to estimate the impact of inflationary shocks in different levels of inequality.

Findings

The results showed that inflationary shocks substantially affect countries with higher levels of inequality, thus suggesting that the detrimental impact of inflation is exacerbated by the high division of classes in a country.

Originality/value

The study contributes to the literature about the relationship between inflation and inequality by proposing that not only the sustained increase in prices but also the inflationary shocks – the deviations from core inflation – contribute to the generation of inequality. Also, to the best of the authors knowledge, the relationship between inflation shocks and inequality in the MENA region has never been analyzed before, thus creating a research gap to provide additional empirical evidence about the sources of inequality. Additionally, the authors contribute with a methodological approach to measure inflationary shocks, based on a semelparous genetic algorithm.

Keywords

Acknowledgements

The authors would like to thank the comments to an early version of this paper provided by John Kuada and the participants of the IARIW-CAPMAS Conference “Experiences and Challenges in Measuring Income, Wealth, Poverty and inequality in the MENA Region,” held in Cairo (Egypt) during November 23–24, 2015.

Citation

Gonzales, R. and Rojas-Hosse, A. (2019), "Inflation shocks and income inequality: An analysis with genetic algorithms and Bayesian quantile regressions", African Journal of Economic and Management Studies, Vol. 10 No. 2, pp. 226-240. https://doi.org/10.1108/AJEMS-10-2018-0299

Publisher

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Emerald Publishing Limited

Copyright © 2019, Emerald Publishing Limited