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Innocent Bystanders? Monetary Policy and Inequality in the U.S

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  • John Silvia
  • Lorenz Kueng
  • Olivier Coibion
  • Yuriy Gorodnichenko

Abstract

We study the effects and historical contribution of monetary policy shocks to consumption and income inequality in the United States since 1980. Contractionary monetary policy actions systematically increase inequality in labor earnings, total income, consumption and total expenditures. Furthermore, monetary shocks can account for a significant component of the historical cyclical variation in income and consumption inequality. Using detailed micro-level data on income and consumption, we document the different channels via which monetary policy shocks affect inequality, as well as how these channels depend on the nature of the change in monetary policy.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 12/199.

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Length: 57
Date of creation: 01 Aug 2012
Date of revision:
Handle: RePEc:imf:imfwpa:12/199

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Keywords: External shocks; Income distribution; Prices; monetary policy; inflation; contractionary monetary policy; inflation target; monetary shocks; inflation rate; rate of inflation; expansionary monetary policy; monetary economics; central bank; money supply; gdp deflator; real wages; monetary fund; monetary transmission mechanism; monetary transmission; macroeconomic stability; price level; expansionary ? monetary policy; long-term interest rates; relative price; monetary factors; inflation across countries; inflation rates; monetary policy rules; real output; nominal variables; expansionary monetary policies; monetary policies; rising inflation; nominal interest rates; high interest rates; real interest rates; real interest rate; monetary economists;

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References

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  1. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," NBER Working Papers 8403, National Bureau of Economic Research, Inc.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Comment la politique monétaire non conventionnelle affecte-t-elle les inégalités ?
    by ? in D'un champ l'autre on 2014-05-11 22:40:00
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Cited by:
  1. Ricardo Reis, 2013. "Central Bank Design," Journal of Economic Perspectives, American Economic Association, vol. 27(4), pages 17-44, Fall.
  2. Jae Won Lee, 2014. "Monetary Policy with Heterogeneous Households and Imperfect Risk-Sharing," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(3), pages 505-522, July.
  3. Ehrmann, Michael & Ziegelmeyer, Michael, 2014. "Household risk management and actual mortgage choice in the euro area," Working Paper Series 1631, European Central Bank.
  4. Villarreal, Francisco G., 2014. "Financial Services and Household Inequality in Mexico," MPRA Paper 57075, University Library of Munich, Germany.
  5. Vincent Sterk & Silvana Tenreyro, 2013. "The Transmission of Monetary Policy Operations through Redistributions and Durable Purchases," CEP Discussion Papers dp1249, Centre for Economic Performance, LSE.
  6. Silvana Tenreyro & Gregory Thwaites, 2013. "Pushing on a string: US monetary policy is less powerful in recessions," Discussion Papers 1301, Centre for Macroeconomics (CFM).
  7. Łukasz Rawdanowicz & Eckhard Wurzel & Ane Kathrine Christensen, 2013. "The Equity Implications of Fiscal Consolidation," OECD Economics Department Working Papers 1013, OECD Publishing.
  8. Eswar S. Prasad, 2013. "Distributional Effects of Macroeconomic Policy Choices in Emerging Market Economies," NBER Working Papers 19668, National Bureau of Economic Research, Inc.
  9. Markus K. Brunnermeier & Yuliy Sannikov, 2012. "Redistributive monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 331-384.

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