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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 Proceedings - Economic Policy Symposium - Jackson Hole.

Volume (Year): (1998)
Issue (Month): ()
Pages: 159-201

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Handle: RePEc:fip:fedkpr:y:1998:p:159-201
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