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

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Author Info

  • Coibion, Olivier

    ()
    (University of Texas at Austin)

  • Gorodnichenko, Yuriy

    ()
    (University of California, Berkeley)

  • Kueng, Lorenz

    ()
    (Northwestern University)

  • Silvia, John

    (Wells Fargo)

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 Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6633.

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Length: 56 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6633

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Keywords: monetary policy; income inequality; consumption inequality;

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  1. Dirk Krueger & Fabrizio Perri, 2002. "Does Income Inequality Lead to Consumption Inequality? Evidence and Theory," NBER Working Papers 9202, 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. 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.
  2. Villarreal, Francisco G., 2014. "Financial Services and Household Inequality in Mexico," MPRA Paper 57075, University Library of Munich, Germany.
  3. Silvana Tenreyro & Gregory Thwaites, 2013. "Pushing on a string: US monetary policy is less powerful in recessions," LSE Research Online Documents on Economics 51559, London School of Economics and Political Science, LSE Library.
  4. Ehrmann, Michael & Ziegelmeyer, Michael, 2014. "Household Risk Management and Actual Mortgage Choice in the Euro Area," MEA discussion paper series 14283, Munich Center for the Economics of Aging (MEA) at the Max Planck Institute for Social Law and Social Policy.
  5. Łukasz Rawdanowicz & Eckhard Wurzel & Ane Kathrine Christensen, 2013. "The Equity Implications of Fiscal Consolidation," OECD Economics Department Working Papers 1013, OECD Publishing.
  6. Reis, Ricardo, 2013. "Central Bank Design," CEPR Discussion Papers 9567, C.E.P.R. Discussion Papers.
  7. 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.
  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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