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Five Facts about the Distributional Income Effects of Monetary Policy Shocks

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  • Niklas Amberg
  • Thomas Jansson
  • Mathias Klein
  • Anna Rogantini Picco

Abstract

We document five facts about the distributional income effects of monetary policy shocks using Swedish administrative individual-level data. (i) The effects of monetary policy shocks are U shaped over the income distribution—that is, expansionary shocks increase the incomes of high- and low-income individuals relative to middle-income individuals. (ii) The large effects in the bottom are accounted for by the labor-income response and (iii) those in the top by the capital-income response. (iv) The heterogeneity in the labor-income response is due to the earnings heterogeneity channel, whereas (v) that in the capital-income response is due to the income composition channel.

Suggested Citation

  • Niklas Amberg & Thomas Jansson & Mathias Klein & Anna Rogantini Picco, 2022. "Five Facts about the Distributional Income Effects of Monetary Policy Shocks," American Economic Review: Insights, American Economic Association, vol. 4(3), pages 289-304, September.
    • Handle: RePEc:aea:aerins:v:4:y:2022:i:3:p:289-304
    DOI: 10.1257/aeri.20210262
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    Cited by:

    1. Francois de Soyres & Erik Frohm & Emily Highkin & Carter Mix, 2021. "Forward Looking Exporters," FEDS Notes 2021-10-06-1, Board of Governors of the Federal Reserve System (U.S.).
    2. Tomás Opazo, 2023. "The Heterogeneous Effect of Monetary Policy Shocks: Evidence for US Households," Working Papers Central Bank of Chile 992, Central Bank of Chile.
    3. Gerke, Rafael & Giesen, Sebastian & Lozej, Matija & Röttger, Joost, 2024. "On household labour supply in sticky-wage HANK models," Discussion Papers 01/2024, Deutsche Bundesbank.
    4. Herman, Uroš & Lozej, Matija, 2023. "Who gets jobs matters: monetary policy and the labour market in HANK and SAM," Working Paper Series 2850, European Central Bank.
    5. Israel, Karl-Friedrich & Sepp, Tim Florian & Sonnenberg, Nils, 2023. "The effects of unconventional monetary policy on stock markets and household incomes in Japan," Working Papers 177, University of Leipzig, Faculty of Economics and Management Science.
    6. Fierro, Luca Eduardo & Giri, Federico & Russo, Alberto, 2023. "Inequality-constrained monetary policy in a financialized economy," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 366-385.
    7. Savignac, Frederique & Hubert, Paul, 2023. "Monetary Policy and Labor Income Inequality: the Role of Extensive and Intensive Margins," CEPR Discussion Papers 18130, C.E.P.R. Discussion Papers.
    8. Sangyup Choi & Tim Willems & Seung Yong Yoo, 2022. "Revisiting the Monetary Transmission Mechanism Through an Industry-Level Differential Approach," IMF Working Papers 2022/017, International Monetary Fund.
    9. Cantore, Cristiano & Ferroni, Filippo & Mumtaz, Hroon & Theophilopoulou, Angeliki, 2022. "A tail of labour supply and a tale of monetary policy," Bank of England working papers 989, Bank of England.
    10. Karl-Friedrich Israel & Tim Florian Sepp & Nils Sonnenberg, 2023. "The Effects of Unconventional Monetary Policy on Stock Markets and Household Incomes in Japan," Post-Print halshs-04024219, HAL.
    11. Brausewetter, Lars & Ludolph, Melina, 2023. "Distributional income effects of banking regulation in Europe," IWH Discussion Papers 24/2023, Halle Institute for Economic Research (IWH).
    12. Sandra Gomes & Pascal Jacquinot, 2023. "A single monetary policy for heterogeneous labour markets: the case of the euro area," Working Papers w202301, Banco de Portugal, Economics and Research Department.
    13. Martin Iseringhausen, 2024. "The housing supply channel of monetary policy," Working Papers 59, European Stability Mechanism, revised 05 Feb 2024.
    14. Minsu Chang & Frank Schorfheide, 2024. "On the Effects of Monetary Policy Shocks on Income and Consumption Heterogeneity," PIER Working Paper Archive 24-003, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    15. Marjan Petreski & Stefan Tanevski & Alejandro D. Jacobo, 2024. "Monetary Policy and the Gendered Labor Market Dynamics: Evidence from Developing Economies," Papers 2402.05729, arXiv.org.
    16. Ahmed Mehedi Nizam, 2023. "An analysis of transnational transfer of wealth through cross-border financial transactions," SN Business & Economics, Springer, vol. 3(1), pages 1-31, January.
    17. Natalia Martín Fuentes & Elena Bárcena Martín & Salvador Pérez Moreno, "undated". "Who takes the cake? The heterogeneous effect of ECB accommodative monetary policy across income classes," Working Papers 657, ECINEQ, Society for the Study of Economic Inequality.
    18. Kilman, Josefin, 2022. "Monetary Policy Shocks for Sweden," Working Papers 2022:18, Lund University, Department of Economics.
    19. Gerardi, Kristopher & Willen, Paul S. & Zhang, David Hao, 2023. "Mortgage prepayment, race, and monetary policy," Journal of Financial Economics, Elsevier, vol. 147(3), pages 498-524.
    20. Shirley (Yilin) Ren, 2023. "Distributional Effects of Monetary Policy Shocks in China," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 51(4), pages 287-301, December.

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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