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Does monetary policy affect income inequality in the euro area?

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  • Anna Samarina

    () (De Nederlandsche Bank & University of Groningen)

  • Anh D.M. Nguyen

    (Bank of Lithuania & Vilnius University)

Abstract

This paper examines how monetary policy affects income inequality in 10 euro area countries over the period 1999–2014. We distinguish macroeconomic and financial channels through which monetary policy may have distributional effects. The macroeconomic channel is captured by wages and employment, while the financial channel by asset prices and returns. We find that expansionary monetary policy in the euro area reduces income inequality, especially in the periphery countries. The macroeconomic channel leads to these equalizing effects: monetary easing reduces income inequality by raising wages and employment. However, there is some indication that the financial channel may weaken the equalizing effect of expansionary monetary policy.

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  • Anna Samarina & Anh D.M. Nguyen, 2019. "Does monetary policy affect income inequality in the euro area?," Bank of Lithuania Working Paper Series 61, Bank of Lithuania.
  • Handle: RePEc:lie:wpaper:61
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    Cited by:

    1. Bilbiie, Florin Ovidiu & Känzig, Diego R & Surico, Paolo, 2019. "Capital, Income Inequality, and Consumption: the Missing Link," CEPR Discussion Papers 14118, C.E.P.R. Discussion Papers.
    2. Kilman, Josefin, 2020. "Monetary Policy and Income Inequality in the United States: The Role of Labor Unions," Working Papers 2020:10, Lund University, Department of Economics.
    3. Mehdi El Herradi & Aurélien Leroy, 2019. "Monetary policy and the top one percent: Evidence from a century of modern economic history," DNB Working Papers 632, Netherlands Central Bank, Research Department.

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    Keywords

    income inequality; monetary policy; euro area;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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