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Who Pays for Disinflation? Disinflationary Monetary Policy and the Distribution of Income

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  • Willem Thorbecke

Abstract

Using theoretical predictions, econometric results, and the example of the Volcker disinflation, Thorbecke establishes that through disinflation's burden on the durable goods and construction industries, small firms, and low-wage workers and its benefits to bond market investors, it effects a redistribution of wealth from the poor to the rich. Because of this distributional consequence, he argues, engineering a disinflationary recession now to wring more inflation out of the economy would be inappropriate. On the contrary, with inflation as low as it is and with upward pressure on wages that could trigger a rise in inflation also low, now is the time for the Federal Reserve to let the economy grow--to seek policies that promote distributive justice and that help those individuals most at risk for shrinking income.

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  • Willem Thorbecke, "undated". "Who Pays for Disinflation? Disinflationary Monetary Policy and the Distribution of Income," Economics Public Policy Brief Archive ppb_38, Levy Economics Institute.
    • Handle: RePEc:lev:levppb:ppb_38
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    Cited by:

    1. Evgeny L. Goryunov, 2018. "Sectoral Effects of Bank of Russia Disinflation Policy," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 21-33, December.

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