NEXUS BETWEEN INCOME INEQUALITY AND ECONOMIC GROWTH: CASE OF THE REPUBLIC OF NORTH MACEDONIA

Year 2019, Volume: 2 Issue: 2, 224 - 236, 03.04.2020

Armend Ademi

Abstract

Controversial evidence approach regarding the relationship between income inequality and economic growth highlights the need for investigating such nexus in the case of the Republic of North Macedonia by utilizing quarterly time series data for time spin 2000-2018. In this regard, the main purpose of the paper indicates the testing of the long-run effects of income inequality on the economic growth, accomplished through the employment of Vector Error Correction Model, while Granger causality test is performed in order to determine the direction of such nexus. Further, empirical findings reveal the existence of a long-run negative significant relationship between income inequality and economic growth in the Republic of North Macedonia. Finally, empirical findings of short-run and long-run dynamics regarding the nexus between income inequality and economic growth in the Republic of North Macedonia concerns its current and future strategies and its contribution to the existing literature rather than solving the debate.

Keywords

GINI index, growth, Granger causality, VECM, Impulse Response Function

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