Doves for the Rich, Hawks for the Poor? Distributional Consequences of Monetary Policy

Gornemann, Nils; Kuester, y Keith; Nakajima, Makoto

doi:10.17016/ifdp.2016.1167

“…Similarly, Heathcote et al () report that in the United States earnings of the lowest‐income individuals are most responsive to business cycle fluctuations. Also, Gornemann, Kuester, and Nakajima () demonstrate in a theoretical New‐Keynesian sticky‐price business‐cycle model with rich household heterogeneity that contractionary monetary policy leads to higher inequality of earnings, income, wealth, and consumption.…”

Section: Literature Reviewmentioning

confidence: 99%

Monetary policy and inequality: Financial channels

O'Farrell

¹

,

Rawdanowicz

²

2017

International Finance

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This paper analyses the effects of monetary policy on inequality over the business cycle via its impacts on returns on assets, the cost of debt servicing, and asset prices in selected advanced economies. Monetary policy easing has a priori ambiguous effects on income and net wealth inequality via financial channels. Effects depend in a complex way on the relative size and distributions of assets, liabilities, and income. In practice, these effects are estimated to be small. A house price increase generally reduces net wealth inequality, while the opposite is true for increases in stock and bond prices. As monetary policy has the potential to affect inequality, monetary authorities face communication challenges. The available research on interactions between monetary policy and inequality does not justify targeting inequality by central banks.

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“…3 See, e.g., Gornemann, Kuester, and Nakajima (2016), Auclert (2016), and Kaplan, Moll, and Violante (2016).…”

Section: Introductionmentioning

confidence: 99%

Austerity, inequality, and private debt overhang

Klein

¹

,

Winkler

²

2019

European Journal of Political Economy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This result is robust to alternative identifications of fiscal consolidations, to different ways of defining periods of private debt overhang, and to controlling for the state of the business cycle. Terms of use: Documents inWe explore different channels through which our findings can be rationalized.

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“…Gornemann et al. () study the distributional effects associated with changes in the systematic conduct of monetary policy. Albanesi () documents the positive cross‐country relationship between inflation rates and inequality and rationalizes it using a political economy model in which low‐income HHs are more exposed to inflation than high‐income HHs.…”

Section: Introductionmentioning

confidence: 99%

Price-Level Changes and the Redistribution of Nominal Wealth across the Euro Area

Adam

¹

,

Zhu

²

2015

Journal of the European Economic Association

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe document the presence of sizable distributional effects from unexpected price level movements in the Euro Area (EA) using sectoral accounts and newly available data from the Household Finance and Consumption Survey. The EA as a whole is a net winner of unexpected price level increases, with Italy, Greece, Portugal and Spain being the biggest beneficiaries, and Belgium and Malta being the largest losers. Governments are net winners of inflation, while the household (HH) sector is a net loser. HHs in Belgium, Ireland, Malta and Germany incur the biggest per capita losses, while HHs in Finland and Spain turn out to be net winners of inflation. Considerable heterogeneity exists also within the HH sector: relatively young middle class HHs are net winners of inflation, while older and richer HHs are losers. As a result, wealth inequality for the EA as a whole decreases with unexpected inflation, although in some countries (Austria, Germany and Malta) inequality increases due to presence of relatively few young borrowing HHs. We document that HHs inflation exposure varies systematically across countries, with HHs in high inflation EA countries holding systematically lower nominal exposures.JEL classification: E31,D31,D14

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Doves for the Rich, Hawks for the Poor? Distributional Consequences of Monetary Policy

Cited by 130 publications

References 93 publications

Monetary policy and inequality: Financial channels

Monetary policy and inequality: Financial channels

Austerity, inequality, and private debt overhang

Price-Level Changes and the Redistribution of Nominal Wealth across the Euro Area

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