The impact of inequality on the transmission of monetary policy

Voinea, Liviu; Lovin, Horaţiu; Cojocaru, Alexandru

doi:10.1016/j.jimonfin.2017.11.007

Cited by 21 publications

(15 citation statements)

References 21 publications

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“…While the rich see their net wealth fall due to a lower value of savings, low-and middle-class people benefit from a decrease in liabilities caused by lower interest rates and higher inflation. Voinea et al (2018) focus on Romania during 2008-2014 and find that households' responses to changes in policy rates depend on their income and indebtedness profiles. Expansive monetary policy is beneficial for middle-income households, as higher inflation lowers their debt repayments, while low-income households do not respond to changes in policy rates due to their limited access to financial markets.…”

Section: Impact Of Monetary Policy On Wealth Inequalitymentioning

confidence: 99%

“…Voinea et al . () focus on Romania during 2008–2014 and find that households’ responses to changes in policy rates depend on their income and indebtedness profiles. Expansive monetary policy is beneficial for middle‐income households, as higher inflation lowers their debt repayments, while low‐income households do not respond to changes in policy rates due to their limited access to financial markets.…”

Section: Monetary Policy and Inequality: Empirical Evidencementioning

confidence: 99%

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Central Bank Policies and Income and Wealth Inequality: A Survey

Colciago

Samarina

Haan

2019

Journal of Economic Surveys

142

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This paper reviews recent research on the relationship between central bank policies and inequality. A new paradigm which integrates sticky‐prices, incomplete markets, and heterogeneity among households is emerging, which allows for the joint study of how inequality shapes macroeconomic aggregates and how macroeconomic shocks and policies affect inequality. The new paradigm features multiple distributional channels of monetary policy. Most empirical studies, however, analyze each potential channel of redistribution in isolation. Our review suggests that empirical research on the effects of conventional monetary policy on income and wealth inequality yields mixed findings, although there seems to be a consensus that higher inflation, at least above some threshold, increases inequality. In contrast to common wisdom, conclusions concerning the impact of unconventional monetary policies on inequality are also not clear cut. To better understand policy effects on inequality, future research should focus on the estimation of General Equilibrium models with heterogeneous agents.

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Section: Impact Of Monetary Policy On Wealth Inequalitymentioning

confidence: 99%

Section: Monetary Policy and Inequality: Empirical Evidencementioning

confidence: 99%

Central Bank Policies and Income and Wealth Inequality: A Survey

Colciago

Samarina

Haan

2019

Journal of Economic Surveys

142

View full text Add to dashboard Cite

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“…The magnitude of redistributive consequences of conventional monetary policy seems to be small, and evidence around the inequality-worsening impact of unconventional monetary policy easing is still inconclusive (Amaral, 2017). Lower inequality is associated with stronger effectiveness and higher homogeneity of monetary policy transmission (Voinea et al, 2017). Relatedly, Hansen et al (2020) use a tractable Two-Agent New Keynesian model that captures important dimensions of inequality and find some support for making inequality an explicit target for monetary policy.…”

Section: Figure 1 Short-term Interest Rate and Inflationmentioning

confidence: 93%

Monetary Policy, Inflation, and Distributional Impact: South Africa’s Case

Miyajima¹

2021

IMF Working Papers

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The South African Reserve Bank has continued to fulfill its constitutional mandate to protect the value of the local currency by keeping inflation low and steady. This paper provides evidence that monetary policy tightening aimed at maintaining low and stable inflation could at the same time reduce consumption inequality over a 12-18 month horizon, commonly understood as the transmission lag of monetary policy action to the real economy, and similar to the distance between survey waves used in the analysis. In response to "exogenous" monetary policy tightening, the real consumption of individuals at lower ends of the consumption distribution declines relatively modestly, or even increases. With greater reliance on government transfers, thus smaller reliance on labor income, and relatively larger food consumption, these individuals appear to benefit mainly from lower inflation. By contrast, the real consumption of individuals at higher ends of the consumption distribution is more likely to decline due to lower labor income, weaker asset price performance, and higher debt service cost.

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“…In addition, Voinea, Lovin and Cojocaru (2018) use a particular model to examine the relationship between household debt and the transmission mechanism of monetary policy in an EU Member state with independent monetary policy and high income inequality [47]. From Romania, result shows that household's reaction to variations in monetary measures depends on their income and indebtedness profile.…”

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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The impact of inequality on the transmission of monetary policy

Cited by 21 publications

References 21 publications

Central Bank Policies and Income and Wealth Inequality: A Survey

Central Bank Policies and Income and Wealth Inequality: A Survey

Monetary Policy, Inflation, and Distributional Impact: South Africa’s Case

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

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