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Monetary policy and the well-being of the poor

  • Christina D. Romer
  • David H. Romer

Poverty is arguably the most pressing economic problem of our time. And because rising inequality, for a given level of income,> implies greater poverty, the distribution of income is also a central concern. At the same time, monetary policy is one of the modern age's most potent tools for managing the economy. Given the importance of poverty and the influence of monetary policy, it is natural to ask if monetary policy can be used as a tool to help the poor.> In a presentation at the Federal Reserve Bank of Kansas City's 1998 symposium, "Income Inequality: Issues and Policy Options," Christina and David Romer examined the influence of monetary policy on poverty and inequality both over the business cycle in the United States and over the longer run in a large sample of countries. They argued that although expansionary policy induces a decline in the poverty rate, the decline is eventually reversed. Second, monetary policy that aims to restrain inflation and minimize output fluctuations is likely to be associated with improved conditions for the poor over time.

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Article provided by Federal Reserve Bank of Kansas City in its journal Economic Review.

Volume (Year): (1999)
Issue (Month): Q I ()
Pages: 21-49

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Handle: RePEc:fip:fedker:y:1999:i:qi:p:21-49:n:v.84no.1
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  1. Rebecca M. Blank & Alan S. Blinder, 1985. "Macroeconomics, Income Distribution, and Poverty," NBER Working Papers 1567, National Bureau of Economic Research, Inc.
  2. Li, Hongyi & Squire, Lyn & Zou, Heng-fu, 1998. "Explaining International and Intertemporal Variations in Income Inequality," Economic Journal, Royal Economic Society, vol. 108(446), pages 26-43, January.
  3. Michael Bruno & William Easterly, 1995. "Inflation Crises and Long-Run Growth," NBER Working Papers 5209, National Bureau of Economic Research, Inc.
  4. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," World Bank Economic Review, World Bank Group, vol. 10(3), pages 565-91, September.
  5. Robert J. Barro, 1996. "Inflation and growth," Proceedings, Federal Reserve Bank of St. Louis, issue May, pages 153-169.
  6. Jeffrey D. Sachs, 1989. "Social Conflict and Populist Policies in Latin America," NBER Working Papers 2897, National Bureau of Economic Research, Inc.
  7. David M. Cutler & Lawrence F. Katz, 1991. "Macroeconomic Performance and the Disadvantaged," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 1-74.
  8. Douglas Laxton & Peter B. Clark & David Rose, 1995. "Asymmetry in the U.S. Output-Inflation Nexus: Issues and Evidence," IMF Working Papers 95/76, International Monetary Fund.
  9. Robert J. Shiller, 1997. "Public Resistance to Indexation: A Puzzle," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 159-228.
  10. Al-Marhubi, Fahim, 1997. "A note on the link between income inequality and inflation," Economics Letters, Elsevier, vol. 55(3), pages 317-319, September.
  11. Cukierman, Alex & Kalaitzidakis, Pantelis & Summers, Lawrence H. & Webb, Steven B., 1993. "Central bank independence, growth, investment, and real rates," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 39(1), pages 95-140, December.
  12. Rebecca M. Blank & David Card, 1993. "Poverty, Income Distribution, and Growth: Are They Still Connected," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 285-340.
  13. Guy Debelle & Douglas Laxton, 1997. "Is the Phillips Curve Really a Curve? Some Evidence for Canada, the United Kingdom, and the United States," IMF Staff Papers, Palgrave Macmillan, vol. 44(2), pages 249-282, June.
  14. Castaneda, Ana & Diaz-Gimenez, Javier & Rios-Rull, Jose-Victor, 1998. "Exploring the income distribution business cycle dynamics," Journal of Monetary Economics, Elsevier, vol. 42(1), pages 93-130, June.
  15. repec:imf:imfwpa:96/111 is not listed on IDEAS
  16. Perl, Lewis J & Solnick, Loren M, 1971. "A Note on 'Trickling Down'," The Quarterly Journal of Economics, MIT Press, vol. 85(1), pages 171-78, February.
  17. Stanley Fischer, 1993. "The Role of Macroeconomic Factors in Growth," NBER Working Papers 4565, National Bureau of Economic Research, Inc.
  18. Blinder, Alan S & Esaki, Howard Y, 1978. "Macroeconomic Activity and Income Distribution in the Postwar United States," The Review of Economics and Statistics, MIT Press, vol. 60(4), pages 604-09, November.
  19. Metcalf, Charles E, 1969. "The Size Distribution of Personal Income during the Business Cycle," American Economic Review, American Economic Association, vol. 59(4), pages 657-68, Part I Se.
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