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The effect of monetary policy on inflation heterogeneity along the income distribution

Author

Listed:
  • Ampudia, Miguel
  • Ehrmann, Michael
  • Strasser, Georg

Abstract

This paper studies the effect of monetary policy on inflation along the income distribution in several euro area countries. It shows that monetary policy has differential effects and identifies two channels which point in opposite directions. On the one hand, different consumption shares imply that the inflation experienced by high-income households responds less to monetary policy. On the other hand, the paper provides novel evidence that there are substantial differences in shopping behaviour and its reaction to monetary policy, which imply that the inflation experienced by high-income households responds more to monetary policy.

Suggested Citation

  • Ampudia, Miguel & Ehrmann, Michael & Strasser, Georg, 2023. "The effect of monetary policy on inflation heterogeneity along the income distribution," CEPR Discussion Papers 18460, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:18460
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    Cited by:

    1. is not listed on IDEAS
    2. Kiss, Regina & Strasser, Georg, 2024. "Inflation heterogeneity across households," Working Paper Series 2898, European Central Bank.
    3. Domenech Palacios, Mar, 2025. "Inflation risk and heterogeneous trading down," Working Paper Series 3156, European Central Bank.
    4. Coccia, Samantha & Russo, Alberto, 2025. "Inflation, inequality and financial vulnerability: Monetary vs. fiscal policy in the face of an energy shock," Energy Economics, Elsevier, vol. 143(C).
    5. Allayioti, Anastasia & Gόrnicka, Lucyna & Holton, Sarah & Martínez Hernández, Catalina, 2024. "Monetary policy pass-through to consumer prices: evidence from granular price data," Working Paper Series 3003, European Central Bank.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • D30 - Microeconomics - - Distribution - - - General

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