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

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  • 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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    Cited by:

    1. Kiss, Regina & Strasser, Georg, 2024. "Inflation heterogeneity across households," Working Paper Series 2898, European Central Bank.

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    More about this item

    Keywords

    distributional effects; inflation; monetary policy; shopping behaviour; substitution;
    All these keywords.

    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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