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Innocent Bystanders? Monetary Policy and Inequality in the U.S

Author

Listed:
  • John Silvia
  • Lorenz Kueng
  • Olivier Coibion
  • Yuriy Gorodnichenko

Abstract

We study the effects and historical contribution of monetary policy shocks to consumption and income inequality in the United States since 1980. Contractionary monetary policy actions systematically increase inequality in labor earnings, total income, consumption and total expenditures. Furthermore, monetary shocks can account for a significant component of the historical cyclical variation in income and consumption inequality. Using detailed micro-level data on income and consumption, we document the different channels via which monetary policy shocks affect inequality, as well as how these channels depend on the nature of the change in monetary policy.

Suggested Citation

  • John Silvia & Lorenz Kueng & Olivier Coibion & Yuriy Gorodnichenko, 2012. "Innocent Bystanders? Monetary Policy and Inequality in the U.S," IMF Working Papers 12/199, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:12/199
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    References listed on IDEAS

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    Keywords

    Consumption; External shocks; Prices; Income distribution; Income inequality; Monetary policy; United States; Consumption Inequality; inflation; contractionary monetary policy; inflation target; monetary shocks; Business Fluctuations; And Cycles; money And Interest Rates; monetary Policy; Central Banking; And The Supply Of Money And Credit;

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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