Publication: The distributive effect of monetary policy: The top one percent makes the difference
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2017-09
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Elsevier
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Abstract
The paper evaluates the distributional effect of monetary policy. The empirical analysis is implemented for the USA, where the dynamics in income inequality is mainly driven by the variation in the top one percent
of the income distribution. The paper uses the inequality measures that
represent the whole income distribution. The distributive effect of monetary
policy is evaluated in the cases of different frequency data. To identify a
monetary policy shock, the paper applies the contemporaneous and the long run
identification methods. In particular, a cointegration relation is determined
among the considered variables and the vector error correction methodology is
used for the identification. The obtained results indicate that contractionary
monetary policy decreases income inequality. These results can have important
implications for the design of policies to reduce income inequality by giving
more weight to monetary policy.
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Keywords
Income inequality, Monetary policy, Cointegration, Identification
Bibliographic citation
Davtyan, K. (2017). The distributive effect of monetary policy: The top one percent makes the difference. Economic Modelling, 65, pp. 106-118.