The distributive effect of monetary policy: The top one percent makes the difference

Davtyan, Karen

doi:10.1016/j.econmod.2017.05.011

Cited by 54 publications

(29 citation statements)

References 44 publications

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“…Results based on structural VAR as well as FAVAR show that contractionary monetary policy shocks lead to an increase in the level and volatility of earnings, income and consumption inequality. Their findings also suggests that the policy of quantitative easing may have adverse distributional effects.On the contrary,Davtyan (2017) using US data from 1983 to 2012 and VECM found that a contractionary monetary policy shock decreases Gini index of income inequality up to 0.4 percentage points. Further, O'Farrell and Rawdanowicz…”

mentioning

confidence: 93%

“…However, there is little or no study that have examined the role of uncertainty in the relationship between economic policy and inequality. The available related studies are those that investigate the link between monetary policy and inequality (Saiki and Frost, 2014;Villarreal, 2014;Nakajima, 2015;Coibion et al, 2017;Mumtaz and Theophilopoulou, 2017;Davtyan, 2017;O'Farrell and Rawdanowicz, 2017 amongst others) and between fiscal policy and inequality (Wolff andZacharias, 2007, Afonso et al, 2010;Doerrenberg and Peichl, 2014 amongst others) but without conditioning the impact on uncertainty. For instance, Saiki and Frost (2014) provide evidence that unconventional monetary policy raises income inequality in Japan in the short run.…”

Section: Introductionmentioning

confidence: 99%

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The effectiveness of monetary and fiscal policy shocks on U.S. inequality: the role of uncertainty

2018

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The study examines the effect of monetary and fiscal policy on inequality conditioned on low and high uncertainty. We use U.S. quarterly time series data on different measures of income, labour earnings, consumption and total expenditure inequality as well as economic uncertainty. Our analysis is based on the impulse responses from the local projection methods that enable us to recover a smoothed average of the underlying impulse response functions. The results show that both contractionary monetary and fiscal policies increase inequality, and in the presence of relatively higher levels of uncertainty, the effectiveness of both policies is weakened. Thus, pointing to the need for policy-makers to be aware of the level of uncertainty while conducting economic policies in the U.S. AbstractThe study examines the effect of monetary and fiscal policy on inequality conditioned on low and high uncertainty. We use U.S. quarterly time series data on different measures of income, labour earnings, consumption and total expenditure inequality as well as economic uncertainty. Our analysis is based on the impulse responses from the local projection methods that enable us to recover a smoothed average of the underlying impulse response functions. The results show that both contractionary monetary and fiscal policies increase inequality, and in the presence of relatively higher levels of uncertainty, the effectiveness of both policies is weakened. Thus, pointing to the need for policy-makers to be aware of the level of uncertainty while conducting economic policies in the U.S.

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confidence: 93%

Section: Introductionmentioning

confidence: 99%

The effectiveness of monetary and fiscal policy shocks on U.S. inequality: the role of uncertainty

2018

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“…Top income quintile reacts more to monetary policy than bottom quintile, but less than middle income quintile. However, Davtyan (2017) evaluates the distributional effect of monetary policy [48]. The empirical analysis is implemented for the US economy, where the dynamics in income inequality is mainly driven by the variation in the top one percent of the income distribution.…”

Section: Monetary Policy Inequality and Financial Developmentmentioning

confidence: 99%

Monetary Policy and Economic Growth in Developing Countries: Evaluating the Policy Nexus in Nigeria

Idris¹

2019

IJBER

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While there are numerous studies on the relationship between monetary policy and economic growth, evaluating the policy nexus between the two phenomena remain inconclusive. Undeniably, monetary policy is believe to influence the employment level, price stability, growth of aggregate output and equilibrium in the balance of payment-for the case of developing economies. But the magnitude of its influence largely depends on how it is conducted through various channels and the independency of the apex bank to select the appropriate instruments for formulating the monetary policy. In lieu of that, this study examines the relationship between monetary policy and economic growth in Nigeria using time series data covering the period of 1980 to 2017. The study employs the Cointegration test and the Ordinary Least Square (OLS) technique with the view to estimating the model coefficients and showcase the policy nexus between the variables. Result indicates the existence of long-run relationship between monetary policy indicators and economic growth. Further empirical findings show that money supply has positive effect, while both exchange rate and interest rate have negative effect on the real GDP. As such, monetary authorities in Nigeria should adequately managed and monitored the growth level of money supply in order to realise the desired growth level. Given the socio-economic and political conditions in Nigeria, there is growing needs to formulate appropriate monetary measures which might encourage borrowing through sound and productive interest rate as well as stable exchange rate.

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“…Their measures of inequality are based on the cross-sectional standard deviations and their data, taken from the Consumer Expenditures Survey, do not include the top one percent of the income distribution which has driven inequality dynamics since 1980. Using a di¤erent identi…cation method for permanent in ‡ation shocks and the Gini index which covers the full population, Davtyan (2017) …nds that a disin ‡ation lowers inequality in the US. Some earlier country-speci…c studies document that higher in ‡ation is correlated with a lower income share held by the poorest part of the population (Blejer and Guerrero, 1990; Datt and Ravallion,1998).…”

Section: Introductionmentioning

confidence: 99%

Disinflation, Inequality and Welfare in a TANK Model

Ferrara

Tirelli

2019

SSRN Journal

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We investigate the redistributive and welfare e¤ects of disin ‡ation in a two-agent New Keynesian (TANK) model characterized by Limited Asset Market Participation (LAMP) and wealth inequality. We highlight two key mechanisms driving our long-run results: i) the cash in advance constraint on …rms working capital (CIA); ii) dividends endogeneity. These two channels point in opposite directions. Lower in ‡ation softens the CIA and, by raising labor demand, lowers inequality. But the disin ‡ation also raises dividends and this increases inequality. The disin ‡ation is always welfare-improving for asset holders. We obtain ambiguous results for non-asset holders, who su¤er substantial consumption losses during the transition. JEL Classi…cation System: E31, E5, D3, D6

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The distributive effect of monetary policy: The top one percent makes the difference

Cited by 54 publications

References 44 publications

The effectiveness of monetary and fiscal policy shocks on U.S. inequality: the role of uncertainty

The effectiveness of monetary and fiscal policy shocks on U.S. inequality: the role of uncertainty

Monetary Policy and Economic Growth in Developing Countries: Evaluating the Policy Nexus in Nigeria

Disinflation, Inequality and Welfare in a TANK Model

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