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The Effects of Monetary Policy Shocks on Inequality

Author: Davide Furceri

Publisher: International Monetary Fund

Published: 2017-01-18

Total Pages: 43

ISBN-13: 1475568355

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This paper provides new evidence of the effect of monetary policy shocks on income inequality. Using a measure of unanticipated changes in policy rates for a panel of 32 advanced and emerging market countries over the period 1990-2013, the paper finds that contractionary (expansionary) monetary actions increase (reduce) income inequality. The effect, however, varies over time, depending on the type of the shocks (tightening versus expansionary monetary policy) and the state of the business cycle, and across countries depending on the share of labor income and redistribution policies. In particular, we find that the effect is larger for positive monetary policy shocks, especially during expansions. Looking across countries, we find that the effect is larger in countries with higher labor share of income and smaller redistribution policies. Finally, while an unexpected increase in policy rates increases inequality, changes in policy rates driven by an increase in growth are associated with lower inequality.

Book Synopsis The Effects of Monetary Policy Shocks on Inequality by : Davide Furceri

Download or read book The Effects of Monetary Policy Shocks on Inequality written by Davide Furceri and published by International Monetary Fund. This book was released on 2017-01-18 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides new evidence of the effect of monetary policy shocks on income inequality. Using a measure of unanticipated changes in policy rates for a panel of 32 advanced and emerging market countries over the period 1990-2013, the paper finds that contractionary (expansionary) monetary actions increase (reduce) income inequality. The effect, however, varies over time, depending on the type of the shocks (tightening versus expansionary monetary policy) and the state of the business cycle, and across countries depending on the share of labor income and redistribution policies. In particular, we find that the effect is larger for positive monetary policy shocks, especially during expansions. Looking across countries, we find that the effect is larger in countries with higher labor share of income and smaller redistribution policies. Finally, while an unexpected increase in policy rates increases inequality, changes in policy rates driven by an increase in growth are associated with lower inequality.

Innocent Bystanders? Monetary Policy and Inequality in the U.S.

Author: Mr.Olivier Coibion

Publisher: International Monetary Fund

Published: 2012-08-01

Total Pages: 57

ISBN-13: 1475505493

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We study the effects and historical contribution of monetary policy shocks to consumption and income inequality in the United States since 1980. Contractionary monetary policy actions systematically increase inequality in labor earnings, total income, consumption and total expenditures. Furthermore, monetary shocks can account for a significant component of the historical cyclical variation in income and consumption inequality. Using detailed micro-level data on income and consumption, we document the different channels via which monetary policy shocks affect inequality, as well as how these channels depend on the nature of the change in monetary policy.

Book Synopsis Innocent Bystanders? Monetary Policy and Inequality in the U.S. by : Mr.Olivier Coibion

Download or read book Innocent Bystanders? Monetary Policy and Inequality in the U.S. written by Mr.Olivier Coibion and published by International Monetary Fund. This book was released on 2012-08-01 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the effects and historical contribution of monetary policy shocks to consumption and income inequality in the United States since 1980. Contractionary monetary policy actions systematically increase inequality in labor earnings, total income, consumption and total expenditures. Furthermore, monetary shocks can account for a significant component of the historical cyclical variation in income and consumption inequality. Using detailed micro-level data on income and consumption, we document the different channels via which monetary policy shocks affect inequality, as well as how these channels depend on the nature of the change in monetary policy.

Distributional Effects of Monetary Policy

Author: Valentina Bonifacio

Publisher: International Monetary Fund

Published: 2021-07-30

Total Pages: 47

ISBN-13: 1513588850

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As central banks across the globe have responded to the COVID-19 shock by rounds of extensive monetary loosening, concerns about their inequality impact have grown. But rising inequality has multiple causes and its relationship with monetary policy is complex. This paper highlights the channels through which monetary policy easing affect income and wealth distribution, and presents some quantitative findings about their importance. Key takeaways are: (i) central banks should remain focused on macro stability while continuing to improve public communications about distributional effects of monetary policy, and (ii) supportive fiscal policies and structural reforms can improve macroeconomic and distributional outcomes.

Book Synopsis Distributional Effects of Monetary Policy by : Valentina Bonifacio

Download or read book Distributional Effects of Monetary Policy written by Valentina Bonifacio and published by International Monetary Fund. This book was released on 2021-07-30 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: As central banks across the globe have responded to the COVID-19 shock by rounds of extensive monetary loosening, concerns about their inequality impact have grown. But rising inequality has multiple causes and its relationship with monetary policy is complex. This paper highlights the channels through which monetary policy easing affect income and wealth distribution, and presents some quantitative findings about their importance. Key takeaways are: (i) central banks should remain focused on macro stability while continuing to improve public communications about distributional effects of monetary policy, and (ii) supportive fiscal policies and structural reforms can improve macroeconomic and distributional outcomes.

Inequality, Leverage and Crises

Author: Mr.Michael Kumhof

Publisher: International Monetary Fund

Published: 2010-11-01

Total Pages: 39

ISBN-13: 1455210757

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The paper studies how high leverage and crises can arise as a result of changes in the income distribution. Empirically, the periods 1920-1929 and 1983-2008 both exhibited a large increase in the income share of the rich, a large increase in leverage for the remainder, and an eventual financial and real crisis. The paper presents a theoretical model where these features arise endogenously as a result of a shift in bargaining powers over incomes. A financial crisis can reduce leverage if it is very large and not accompanied by a real contraction. But restoration of the lower income group's bargaining power is more effective.

Book Synopsis Inequality, Leverage and Crises by : Mr.Michael Kumhof

Download or read book Inequality, Leverage and Crises written by Mr.Michael Kumhof and published by International Monetary Fund. This book was released on 2010-11-01 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: The paper studies how high leverage and crises can arise as a result of changes in the income distribution. Empirically, the periods 1920-1929 and 1983-2008 both exhibited a large increase in the income share of the rich, a large increase in leverage for the remainder, and an eventual financial and real crisis. The paper presents a theoretical model where these features arise endogenously as a result of a shift in bargaining powers over incomes. A financial crisis can reduce leverage if it is very large and not accompanied by a real contraction. But restoration of the lower income group's bargaining power is more effective.

Monetary Policy in the Euro Area

Author: Otmar Issing

Publisher: Cambridge University Press

Published: 2001-07-26

Total Pages: 220

ISBN-13: 9780521788885

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A non-technical analysis of the monetary policy strategy, institutions and operational procedures of the Eurosystem, first published in 2001.

Book Synopsis Monetary Policy in the Euro Area by : Otmar Issing

Download or read book Monetary Policy in the Euro Area written by Otmar Issing and published by Cambridge University Press. This book was released on 2001-07-26 with total page 220 pages. Available in PDF, EPUB and Kindle. Book excerpt: A non-technical analysis of the monetary policy strategy, institutions and operational procedures of the Eurosystem, first published in 2001.

Innocent Bystanders?

Author: Olivier Coibion

Publisher:

Published: 2012

Total Pages: 53

ISBN-13:

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Book Synopsis Innocent Bystanders? by : Olivier Coibion

Download or read book Innocent Bystanders? written by Olivier Coibion and published by . This book was released on 2012 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study the effects and historical contribution of monetary policy shocks to consumption and income inequality in the United States since 1980. Contractionary monetary policy actions systematically increase inequality in labor earnings, total income, consumption and total expenditures. Furthermore, monetary shocks can account for a significant component of the historical cyclical variation in income and consumption inequality. Using detailed micro-level data on income and consumption, we document the different channels via which monetary policy shocks affect inequality, as well as how these channels depend on the nature of the change in monetary policy -- National Bureau of Economic Research web site.

Finance and Inequality

Author: Mr.Martin Cihak

Publisher: International Monetary Fund

Published: 2020-01-17

Total Pages: 50

ISBN-13: 1513526545

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The study examines empirical relationships between income inequality and three features of finance: depth (financial sector size relative to the economy), inclusion (access to and use of financial services by individuals and firms), and stability (absence of financial distress). Using new data covering a wide range of countries, the analysis finds that the financial sector can play a role in reducing inequality, complementing redistributive fiscal policy. By expanding the provision of financial services to low-income households and small businesses, it can serve as a powerful lever in helping create a more inclusive society but—if not well managed—it can amplify inequalities.

Book Synopsis Finance and Inequality by : Mr.Martin Cihak

Download or read book Finance and Inequality written by Mr.Martin Cihak and published by International Monetary Fund. This book was released on 2020-01-17 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: The study examines empirical relationships between income inequality and three features of finance: depth (financial sector size relative to the economy), inclusion (access to and use of financial services by individuals and firms), and stability (absence of financial distress). Using new data covering a wide range of countries, the analysis finds that the financial sector can play a role in reducing inequality, complementing redistributive fiscal policy. By expanding the provision of financial services to low-income households and small businesses, it can serve as a powerful lever in helping create a more inclusive society but—if not well managed—it can amplify inequalities.

Causes and Consequences of Income Inequality

Author: Ms. Era Dabla-Norris

Publisher: International Monetary Fund

Published: 2015-06-15

Total Pages: 33

ISBN-13: 1513547437

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This paper analyzes the extent of income inequality from a global perspective, its drivers, and what to do about it. The drivers of inequality vary widely amongst countries, with some common drivers being the skill premium associated with technical change and globalization, weakening protection for labor, and lack of financial inclusion in developing countries. We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down. This suggests that policies need to be country specific but should focus on raising the income share of the poor, and ensuring there is no hollowing out of the middle class. To tackle inequality, financial inclusion is imperative in emerging and developing countries while in advanced economies, policies should focus on raising human capital and skills and making tax systems more progressive.

Book Synopsis Causes and Consequences of Income Inequality by : Ms. Era Dabla-Norris

Download or read book Causes and Consequences of Income Inequality written by Ms. Era Dabla-Norris and published by International Monetary Fund. This book was released on 2015-06-15 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper analyzes the extent of income inequality from a global perspective, its drivers, and what to do about it. The drivers of inequality vary widely amongst countries, with some common drivers being the skill premium associated with technical change and globalization, weakening protection for labor, and lack of financial inclusion in developing countries. We find that increasing the income share of the poor and the middle class actually increases growth while a rising income share of the top 20 percent results in lower growth—that is, when the rich get richer, benefits do not trickle down. This suggests that policies need to be country specific but should focus on raising the income share of the poor, and ensuring there is no hollowing out of the middle class. To tackle inequality, financial inclusion is imperative in emerging and developing countries while in advanced economies, policies should focus on raising human capital and skills and making tax systems more progressive.

Should Inequality Factor Into Central Banks' Decisions?

Author: Niels-Jakob Harbo Hansen

Publisher:

Published: 2023

Total Pages: 0

ISBN-13:

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Book Synopsis Should Inequality Factor Into Central Banks' Decisions? by : Niels-Jakob Harbo Hansen

Download or read book Should Inequality Factor Into Central Banks' Decisions? written by Niels-Jakob Harbo Hansen and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Inequality, Output-Inflation Trade-Off and Economic Policy Uncertainty

Author: Eliphas Ndou

Publisher: Springer

Published: 2019-08-13

Total Pages: 507

ISBN-13: 3030198030

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This book focuses on income inequality, output-inflation trade-off and economic policy uncertainty in South Africa. Tight monetary and macroprudential policies raise income inequality. Income inequality transmits monetary policy and macroprudential policy shocks to real economic activity. Economic policy uncertainty influences the dynamics in the lending rate margins, inflation expectations, credit, pass-through of the repo rate to bank lending rates and companies’ cash holdings. The trade-off between output and inflation and output growth persistence vary with inflation regimes. Stimulatory demand policy shocks are less effective in high inflation regime. High income inequality raises consumption inequality, which raises demand for credit, but price stability matters in this link. Increased bank concentration raises income inequality, lowers economic growth and employment rate. Elevated economic policy uncertainty lowers output growth, lowers capital formation, reduces credit and raises companies’ cash holdings. Increased companies’ cash holdings reduce capital formation and impact the transmission of expansionary monetary policy shocks to real economic activity. This book shows there is an inflation level within the target band below it which lowers income inequality, while raising GDP growth and employment. Thus price stability, economic policy uncertainty and income inequality matter for the efficient transmission of policy shocks.

Book Synopsis Inequality, Output-Inflation Trade-Off and Economic Policy Uncertainty by : Eliphas Ndou

Download or read book Inequality, Output-Inflation Trade-Off and Economic Policy Uncertainty written by Eliphas Ndou and published by Springer. This book was released on 2019-08-13 with total page 507 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book focuses on income inequality, output-inflation trade-off and economic policy uncertainty in South Africa. Tight monetary and macroprudential policies raise income inequality. Income inequality transmits monetary policy and macroprudential policy shocks to real economic activity. Economic policy uncertainty influences the dynamics in the lending rate margins, inflation expectations, credit, pass-through of the repo rate to bank lending rates and companies’ cash holdings. The trade-off between output and inflation and output growth persistence vary with inflation regimes. Stimulatory demand policy shocks are less effective in high inflation regime. High income inequality raises consumption inequality, which raises demand for credit, but price stability matters in this link. Increased bank concentration raises income inequality, lowers economic growth and employment rate. Elevated economic policy uncertainty lowers output growth, lowers capital formation, reduces credit and raises companies’ cash holdings. Increased companies’ cash holdings reduce capital formation and impact the transmission of expansionary monetary policy shocks to real economic activity. This book shows there is an inflation level within the target band below it which lowers income inequality, while raising GDP growth and employment. Thus price stability, economic policy uncertainty and income inequality matter for the efficient transmission of policy shocks.