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Monetary policy and the persistent aggregate effects of wealth redistribution

Author

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  • Kuncl, Martin
  • Ueberfeldt, Alexander

Abstract

Monetary easing redistributes from savers, some of whom are retired and not adjusting labor supply, to borrowers who reduce their labor supply. This results in persistently lower aggregate labor and output. Hence the interaction of labor supply heterogeneity with heterogeneity in net nominal positions of households creates a monetary policy trade-off whereby short-term economic stimulus is followed by lower output over the medium term. The policy trade-off is stronger in economies with more nominal household debt and a larger wealth share of retired households but weakened by a more aggressive monetary policy stance and under price-level targeting.

Suggested Citation

  • Kuncl, Martin & Ueberfeldt, Alexander, 2024. "Monetary policy and the persistent aggregate effects of wealth redistribution," Journal of Monetary Economics, Elsevier, vol. 144(C).
    • Handle: RePEc:eee:moneco:v:144:y:2024:i:c:s0304393223001599
    DOI: 10.1016/j.jmoneco.2023.12.003
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    More about this item

    Keywords

    Monetary policy transmission; Monetary policy framework; Household heterogeneity; Fisher channel;
    All these keywords.

    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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