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Monetary policy and racial inequality

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  • Bartscher, Alina
  • Kuhn, Moritz
  • Schularick, Moritz
  • Wachtel, Paul

Abstract

This paper aims at an improved understanding of the relationship between monetary policy and racial inequality. We investigate the distributional effects of monetary policy in a unified framework, linking monetary policy shocks both to earnings and wealth differentials between black and white households. Specifically, we show that, although a more accommodative monetary policy increases employment of black households more than white households, the overall effects are small. At the same time, an accommodative monetary policy shock exacerbates the wealth difference between black and white households, because black households own fewer financial assets that appreciate in value. Over a five year horizon, the employment effects remain substantially smaller than the countervailing portfolio effects.

Suggested Citation

  • Bartscher, Alina & Kuhn, Moritz & Schularick, Moritz & Wachtel, Paul, 2021. "Monetary policy and racial inequality," CEPR Discussion Papers 15734, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:15734
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    Cited by:

    1. Edmond Berisha & Ram Sewak Dubey & Eric Olson, 2022. "Monetary policy and the racial wage gap," Papers 2203.03565, arXiv.org.
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    3. Dubravko Mihaljek, 2021. "Interactions between fiscal and monetary policies: a brief history of a long relationship," Public Sector Economics, Institute of Public Finance, vol. 45(4), pages 419-432.

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    More about this item

    Keywords

    income distribution; monetary policy; racial inequality; wealth distribution; Wealth effects;
    All these keywords.

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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