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Monetary Policy across the Wealth Distribution

Author

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  • Franconi, Alessandro
  • Rella, Giacomo

Abstract

Using vector autoregression and the Distributional Financial Accounts of the United States, we show that monetary policy has unequal effects across the wealth distribution. The direction and persistence of these effects depend on the policy instrument and the wealth group. Interest rate cuts initially reduce wealth inequality but increase it in the medium run. Asset purchases, instead, increase wealth inequality but only temporarily. Housing is the main channel through which monetary policy affects wealth at the bottom. The effects of monetary policy on capital gains are larger at the top due to heterogeneous portfolios. (Stone Center on Socio-Economic Inequality Working Paper)

Suggested Citation

  • Franconi, Alessandro & Rella, Giacomo, 2023. "Monetary Policy across the Wealth Distribution," SocArXiv hn3pc, Center for Open Science.
    • Handle: RePEc:osf:socarx:hn3pc
    DOI: 10.31219/osf.io/hn3pc
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    References listed on IDEAS

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    9. Diana Hancock & Wayne Passmore, 2015. "How Does the Federal Reserve's Large-Scale Asset Purchases (LSAPs) Influence Mortgage-Backed Securities (MBS) Yields and U.S. Mortgage Rates?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 43(4), pages 855-890, November.
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    Cited by:

    1. Davide Brignone & Alessandro Franconi & Marco Mazzali, 2023. "Robust Impulse Responses using External Instruments: the Role of Information," Papers 2307.06145, arXiv.org.
    2. Morlin, Guilherme Spinato & Stamegna, Marco & D'Alessandro, Simone, 2025. "Energy prices, inflation, and distribution: A simulation model and policy analysis for Italy," Structural Change and Economic Dynamics, Elsevier, vol. 74(C), pages 28-39.

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