To which extent do monetary policies affect inequality ?

Since the 2008 outburst, monetary policies have had to face multiple challenges. The rapid and long-lasting decline of the interest rate, combined with the so-called "quantitative easing policies" to face the dramatic collapse in economic activity then the effects of the Covid-19 pandemic. In the wake of the surge of inflation in 2022-23, this policy has been followed by a significant increase of the interest rates. Since then, interest rates have remained high in the US and have decreased in other regions, most notably in the European Union. Many empirical papers have tried to assess the economic effects of monetary policies, most notably on inflation and economic activity. A neglected dimension of those policies is often their effect on inequality. However, some studies try to assess the distributive effects of these policies on wealth or income distribution. These papers did not come to any clear-cut conclusion. Consequently, the aim of this paper is to assess the effects of expansionary and restrictive monetary policies on income and wealth inequalities. To do so, we build a stock-flow consistent agent-based model of a closed economy in which households are heterogeneous in terms of wealth and income, which translates into the composition of their portfolios. Poor households only have debt, while richer households hold deposits, mortgages, bonds, equity, and capital. These consequences of various monetary policies and policy mixes are assessed using different indicators.