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Monetary policy and the top one percent: Evidence from a century of modern economic history

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Abstract

This paper examines the distributional e ects of monetary policy in 12 OECD economies between 1920 and 2016. We exploit the implications of the macroeconomic policy trilemma with an external instrument approach to analyse how top income shares respond to monetary policy shocks. The results indicate that monetary tightening strongly decreases the share of national income held by the top one percent and vice versa for a monetary expansion, irrespective of the position of the economy. This e ect (i) holds for the top percentile and the ultra-rich (top 0.1% and 0.01% income shares), while (ii) it does not necessarily induce a decrease in income inequality when considering the entire income distribution. Our ndings also suggest that the e ect of monetary policy on top income shares is likely to be channeled via real asset returns.

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  • Mehdi El Herradi & Aurélien Leroy, 2020. "Monetary policy and the top one percent: Evidence from a century of modern economic history," AMSE Working Papers 2047, Aix-Marseille School of Economics, France.
    • Handle: RePEc:aim:wpaimx:2047
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    Cited by:

    1. Karl-Friedrich Israel & Tim Florian Sepp & Nils Sonnenberg, 2022. "Japanese monetary policy and household saving," Applied Economics, Taylor & Francis Journals, vol. 54(21), pages 2373-2389, May.

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    More about this item

    Keywords

    monetary policy; top incomes; macroeconomic policy trilemma; external instrument;
    All these keywords.

    JEL classification:

    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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