Beschreibung:
Latin America has made significant progress in financial development and poverty reduction in recent decades. Nevertheless, its persistent levels of inequality have further potential to be reduced, and financial development could be an effective way to accomplish this. This paper analyzed the causal relationship between income inequality and financial development in 15 Latin American countries between 1990 and 2020 through a novel use of instrumental variables. The results showed a significant negative relationship between these two variables, which, however, may reverse after a certain level of development. Therefore, the results suggest that development must promote a deeper, more accessible, and more efficient financial sector in an inclusive and sustainable manner to achieve a greater equalization of financial opportunities and a reduction in income inequality in the Latin American population.