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Monetary policy shocks and inflation inequality

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  • Christoph Lauper
  • Giacomo Mangiante

Abstract

We evaluate household-level inflation rates since 1980, for which we compute various dispersion measures, and we assess their reaction to monetary policy shocks. We find that (i) contractionary monetary policy significantly and persistently decreases inflation dispersion in the economy, and that (ii)different demographic groups are heterogeneously affected by monetary policy. Due to different consumption bundles, middle-income households experience higher median inflation rates, which at the same time are more reactive to a contractionary monetary policy shock, leading to an overall convergence of inflation rates between income groups. These results imply that (iii) the impact of monetary policy shocks on expenditure inequality is significantly more muted once we control for differences in individual inflation rates.

Suggested Citation

  • Christoph Lauper & Giacomo Mangiante, 2021. "Monetary policy shocks and inflation inequality," Cahiers de Recherches Economiques du Département d'économie 21.02a, Université de Lausanne, Faculté des HEC, Département d’économie.
    • Handle: RePEc:lau:crdeep:21.02a
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    Cited by:

    1. Ampudia, Miguel & Ehrmann, Michael & Strasser, Georg, 2023. "The effect of monetary policy on inflation heterogeneity along the income distribution," CEPR Discussion Papers 18460, C.E.P.R. Discussion Papers.
    2. Ampudia, Miguel & Ehrmann, Michael & Strasser, Georg, 2024. "Shopping behavior and the effect of monetary policy on inflation heterogeneity along the income distribution," Journal of Monetary Economics, Elsevier, vol. 148(C).

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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

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