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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 distributionin several euro area countries. It shows that monetary policy has differential effects and identifies twochannels which point in opposite directions. On the one hand, different consumption shares imply thatthe inflation experienced by high-income households responds less to monetary policy. On the otherhand, the paper provides novel evidence that there are substantial differences in shopping behaviourand its reaction to monetary policy, which imply that the inflation experienced by high-income householdsresponds more to monetary policy. JEL Classification: E31, E52, D30

Suggested Citation

  • Ampudia, Miguel & Ehrmann, Michael & Strasser, Georg, 2023. "The effect of monetary policy on inflation heterogeneity along the income distribution," Working Paper Series 2858, European Central Bank.
    • Handle: RePEc:ecb:ecbwps:20232858
    Note: 2445760
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    References listed on IDEAS

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    Cited by:

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    2. Neyer, Ulrike & Stempel, Daniel & Stevens, Alexandra, 2025. "Subsistence consumption and inflation heterogeneity: Implications for monetary policy transmission in a HANK model," DICE Discussion Papers 427, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    3. Domenech Palacios, Mar, 2025. "Inflation risk and heterogeneous trading down," Working Paper Series 3156, European Central Bank.
    4. Neyer Ulrike & Stempel Daniel, 2025. "Wachstumsschwäche – Gibt es geldpolitischen Handlungsbedarf?," Wirtschaftsdienst, Sciendo, vol. 105(12), pages 866-869.
    5. 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).
    6. 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.

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    Keywords

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    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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