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Deciphering the U-shaped impact: High frequency data and monetary policy effects on inequality

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  • Juan-Francisco Albert
  • Nerea Gomez-Fernandez

Abstract

Utilizing the Realtime Inequality database, this paper employs a Bayesian Proxy SVAR model to examine the distributional effects of monetary policy on various dimensions of income and wealth inequality in the United States. This study introduces a novel approach by utilizing new monthly series to accurately estimate the final effects and transmission channels. The results indicate a U-shaped pattern in the effects of expansionary monetary policy on inequality. In the case of income, both the bottom 50 % and the top 10 % are the main beneficiaries, while the middle 40 % experience a comparatively smaller positive impact. However, regarding wealth, it is the top 10 % who benefit most prominently from expansionary monetary policy. Identified channels, including earnings heterogeneity and income composition, contribute to these findings. This research enhances understanding of monetary policy’s nuanced transmission channels, providing timely insights for policymakers

Suggested Citation

  • Juan-Francisco Albert & Nerea Gomez-Fernandez, 2025. "Deciphering the U-shaped impact: High frequency data and monetary policy effects on inequality," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 25(4).
    • Handle: RePEc:tcb:cebare:v:25:y:2025:i:4:article:100219
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