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

  • Coibion, Olivier


    (University of Texas at Austin)

  • Gorodnichenko, Yuriy


    (University of California, Berkeley)

  • Kueng, Lorenz


    (Northwestern University)

  • Silvia, John

    (Wells Fargo)

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.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6633.

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Length: 56 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:iza:izadps:dp6633
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  6. Olivier Coibion & Yuriy Gorodnichenko, 2010. "Monetary Policy, Trend Inflation and the Great Moderation:An Alternative Interpretation," Working Papers 94, Department of Economics, College of William and Mary.
  7. Albanesi, Stefania, 2002. "Inflation and Inequality," CEPR Discussion Papers 3470, C.E.P.R. Discussion Papers.
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  19. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper 0107, Federal Reserve Bank of Cleveland.
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