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Monetary policy, inequality and political instability

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  • Pablo Duarte
  • Gunther Schnabl

Abstract

Voters in the industrialised countries are increasingly expressing dissatisfaction by dissenting from the established political parties and candidates. Based on the concepts of justice by Hayek, Rawls and Buchanan, we argue that the growing dissatisfaction is rooted in the asymmetric pattern of monetary policies since the mid‐1980s for two reasons. First, the structurally declining interest rates and the unconventional monetary policy measures have granted privileges to specific groups. Second, the increasingly expansionary monetary policies have negative growth effects, which have reduced the scope for compensation of the ones excluded from the privileges. As a result, the acceptance of the prevailing economic and political order is undermined and political instability increases.

Suggested Citation

  • Pablo Duarte & Gunther Schnabl, 2019. "Monetary policy, inequality and political instability," The World Economy, Wiley Blackwell, vol. 42(2), pages 614-634, February.
  • Handle: RePEc:bla:worlde:v:42:y:2019:i:2:p:614-634
    DOI: 10.1111/twec.12730
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    Cited by:

    1. Jürgen Michels & Gunther Schnabl & Helmut Schleweis & Dominik Löber & Michael Menhart & Ansgar Belke & Daniel Gros, 2019. "Gewinner und Verlierer in der Welt dauerhafter Niedrigzinsen," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 72(20), pages 03-23, October.
    2. Michael Patrick Curran & Matthew J. Fagerstrom, 2019. "Monetary Growth and Financial Sector Wages," Villanova School of Business Department of Economics and Statistics Working Paper Series 41, Villanova School of Business Department of Economics and Statistics.
    3. Karl‐Friedrich Israel & Gunther Schnabl, 2024. "Alternative measures of price inflation and the perception of real income in Germany," The World Economy, Wiley Blackwell, vol. 47(2), pages 618-636, February.
    4. Demary, Markus & Niehues, Judith & Stockhausen, Maximilian & Zdrzalek, Jonas, 2021. "Der Einfluss der EZB-Geldpolitik auf die Vermögensverteilung in Deutschland," Studien, Stiftung Familienunternehmen / Foundation for Family Businesses, number 250019.
    5. Ayşe ATILGAN-YAŞA & Selim ŞANLISOY & Ahmet ÖZEN, 2020. "The Relationship Between Political Instability and Budget Consistency: 1984- 2018 Period Analysis in Turkey," Sosyoekonomi Journal, Sosyoekonomi Society, issue 28(44).
    6. Karl‐Friedrich Israel, 2021. "The fiat money illusion: On the cost‐efficiency of modern central banking," The World Economy, Wiley Blackwell, vol. 44(6), pages 1701-1719, June.
    7. Karl-Friedrich Israel & Tim Florian Sepp & Nils Sonnenberg, 2022. "Japanese monetary policy and household saving," Applied Economics, Taylor & Francis Journals, vol. 54(21), pages 2373-2389, May.
    8. Thomas Mayer & Gunther Schnabl, 2019. "Reasons for the Demise of Interest: Savings Glut and Secular Stagnation or Central Bank Policy?," CESifo Working Paper Series 7954, CESifo.
    9. Karl-Friedrich Israel & Sophia Latsos, 2020. "The impact of (un)conventional expansionary monetary policy on income inequality – lessons from Japan," Applied Economics, Taylor & Francis Journals, vol. 52(40), pages 4403-4420, August.
    10. Andreas Hoffmann & Gunther Schnabl, 2018. "Warum der frühe Ausstieg aus der finanziellen Repression lohnt [Why an Early Exit from Financial Repression is Worthwhile]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 98(7), pages 498-503, July.

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    More about this item

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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