Nonlinear Dynamics of the Development-Inequality Nexus in Emerging Countries: The Case of a Prudential Policy Regime

This study analyses the nonlinear dynamic impact of economic development on income inequality in a prudential policy regime panel 15 emerging markets from 1985–2019. More importantly, we seek to extend existing debate this subject, with roots back seminal work by Kuznets and many others, add twist introducing distinction between (1985–1999) non-prudential (2000–2019), as well threshold level at which reduces inequality, using Panel Smooth Transition Regression (PSTR). The Generalized Method Moments fixed-effect models will be used support our baseline results. PSTR model was adopted due its ability deal features that cannot accounted for techniques, such endogeneity, homogeneity, cross-country variability, time instability within model. We found evidence non-linear effect two variables, where US$13,800, above selected countries, further confirms inverted U-shape both regimes. Macroprudential policies were trigger development-inequality relationships. Our largely suggests policymakers ought formulate aim attract investment, then create job opportunities foster an improvement stan-dard living, also should abreast before implementing macroprudential policies.