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Distributional Effects of Monetary Policies in a New Neoclassical Model with Progressive Income Taxation


  • Burkhard Heer; Alfred Maussner

    () (School of Economics and Management Free University of Bolzano-Bozen)


In our dynamic optimizing sticky price model, agents are heterogenous with regard to their assets and their income. Unanticipated inflation redistributes income and wealth. In order to model the wealth distribution, we study a 60-period OLG model with aggregate uncertainty. A positive technology shock increases the concentration of wealth as measured by the Gini coefficient considerably. In particular, a one percent increase of the technology level results in a one percent increase of the Gini coefficient. An unexpected expansionary monetary policy is found to reduce the inequality of the wealth distribution. In addition, we find that the business cycle dynamics in the OLG model in response to both a technology shock and a monetary shock are different from those in the corresponding representative-agent model

Suggested Citation

  • Burkhard Heer; Alfred Maussner, 2005. "Distributional Effects of Monetary Policies in a New Neoclassical Model with Progressive Income Taxation," Computing in Economics and Finance 2005 12, Society for Computational Economics.
  • Handle: RePEc:sce:scecf5:12

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    References listed on IDEAS

    1. Hartwick, John M., 2004. "Sustaining periodic motion and maintaining capital in classical mechanics," Japan and the World Economy, Elsevier, vol. 16(3), pages 337-358, August.
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    Cited by:

    1. Yann Algan & Olivier Allais & Edouard Challe & Xavier Ragot, 2012. "Monetary Shocks Under Incomplete Markets," Sciences Po publications info:hdl:2441/1j0a1p4ifa9, Sciences Po.
    2. Burkhard Heer, 2013. "A note on the cyclical behaviour of the income distribution," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2013(1), pages 1-7.
    3. Olivier Allais & Yann Algan & Edouard Challe & Xavier Ragot, 2015. "The Welfare Cost Of Inflation Risk Under Imperfect Insurance," PSE Working Papers hal-01157168, HAL.
    4. Yann Algan & Xavier Ragot, 2010. "Monetary policy with Heterogeneous Agents and Borrowing Constraints," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(2), pages 295-316, April.
    5. Heer, Burkhard & Süssmuth, Bernd, 2013. "Tax bracket creep and its effects on income distribution," Journal of Macroeconomics, Elsevier, vol. 38(PB), pages 393-408.
    6. Larin, Benjamin, 2016. "Bubble-driven business cycles," Working Papers 143, University of Leipzig, Faculty of Economics and Management Science.
    7. N'Yilimon Nantob, 2015. "Income Inequality and Inflation in Developing Countries: An Empirical Investigation," Economics Bulletin, AccessEcon, vol. 35(4), pages 2888-2902.
    8. repec:prg:jnlpep:v:2017:y:2017:i:6:id:630:p:633-645 is not listed on IDEAS
    9. repec:prg:jnlpep:v:preprint:id:630:p:1-13 is not listed on IDEAS
    10. Yasuoka, Masaya, 2016. "Money and Pay-As-you-Go Pension," MPRA Paper 75578, University Library of Munich, Germany.
    11. Pierre Monnin, 2014. "Inflation and Income Inequality in Developed Economies," Working Papers 1401, Council on Economic Policies.

    More about this item


    Distribution Effects; Unanticipated Inflation; Heterogeneous Agents;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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