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Distributional role of monetary policy under limited credit access

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  • Hazra, Devika

Abstract

The paper explores the redistributive effects of a monetary policy shock in a limited participation framework with limited credit access. Expansionary monetary policy redistributes consumption from traders to non-traders. This redistribution is the largest when only financial market participants have a choice between multiple means of payments while non-participants do not. Welfare analysis reveals that the effectiveness of monetary policy on the economy is the greatest when all agents (financial market participants and nonparticipants) can choose from alternative means of payment in a financially segmented model. The model is calibrated to the US economy for quantitative analysis.

Suggested Citation

  • Hazra, Devika, 2018. "Distributional role of monetary policy under limited credit access," Research in Economics, Elsevier, vol. 72(4), pages 494-510.
    • Handle: RePEc:eee:reecon:v:72:y:2018:i:4:p:494-510
    DOI: 10.1016/j.rie.2018.09.003
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    References listed on IDEAS

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    Cited by:

    1. Hazra, Devika, 2022. "Does monetary policy favor the skilled? − Distributional role of monetary policy," The Quarterly Review of Economics and Finance, Elsevier, vol. 86(C), pages 65-86.

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    More about this item

    Keywords

    Cash-Credit choice; Policy; Choice of payment methods; Limited participation; Limited credit;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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