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Monetary Policy and the Distribution of Income: Evidence from U.S. Metropolitan Areas

Author

Listed:
  • Favara, Giovanni
  • Loria, Francesca
  • ZakrajÅ¡ek, Egon

Abstract

We use zip code-level Statistics of Income data from the Internal Revenue Service to measure the distribution of income within U.S. metropolitan areas from 1998 through 2019. Exploiting geographic variation in income distribution over time, we study how unanticipated changes in the monetary policy stance shape the subsequent dynamics of income inequality. The results indicate that monetary policy persistently affects labor income inequality and that these distributional effects are amplified significantly in weak local labor markets.

Suggested Citation

  • Favara, Giovanni & Loria, Francesca & ZakrajÅ¡ek, Egon, 2025. "Monetary Policy and the Distribution of Income: Evidence from U.S. Metropolitan Areas," CEPR Discussion Papers 19995, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:19995
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    File URL: https://cepr.org/publications/DP19995
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    Keywords

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    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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