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The effects of monetary policy on income and wealth inequality in the U.S. Exploring different channels

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  • Albert, Juan-Francisco
  • Peñalver, Antonio
  • Perez-Bernabeu, Alberto

Abstract

We assess the effects of monetary policy shocks on income and wealth inequality through direct inequality measures and by analyzing several transmission channels explored in recent literature. Furthermore, we analyze two additional channels: the Housing and the Fiscal channels. The methodology adopted is a Bayesian proxy SVAR using a high-frequency identification based on the external instruments approach. Our own policy shocks are constructed for this purpose. The results show that an expansionary monetary policy shock does not have a significant effect on income inequality due to the existence of opposite channels, whereas it increases wealth inequality mainly through the portfolio channel.

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  • Albert, Juan-Francisco & Peñalver, Antonio & Perez-Bernabeu, Alberto, 2020. "The effects of monetary policy on income and wealth inequality in the U.S. Exploring different channels," Structural Change and Economic Dynamics, Elsevier, vol. 55(C), pages 88-106.
  • Handle: RePEc:eee:streco:v:55:y:2020:i:c:p:88-106
    DOI: 10.1016/j.strueco.2020.07.002
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    More about this item

    Keywords

    Monetary policy; Income and wealth inequality; BVAR; Proxy SVAR; High-frequency identification;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

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