Monetary Policy and Inequality

Bibliographic Data

ID4028935
AuthorsAlisdair Mckay (Alisdair McKay is a Senior Research Economist, Federal Reserve Bank of Minneapolis, Minneapolis, Minnesota. Cambridge, Massachusetts.), Christian K Wolf (Christian K. Wolf is Assistant Professor of Economics, Massachusetts Institute of Technology, and a Faculty Research Fellow, National Bureau of Economic Research, Cambridge, Massachusetts.)
Year2023
Volume37
Issue1
Pages121-144
Publication date2023-02-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Journal of Economic Perspectives (JOURNAL)
Journal identifiersISSN: 0895-3309 • E-ISSN: 1944-7965
PublisherAmerican Economic Association (PUBLISHER • US)
DOI10.1257/jep.37.1.121
OpenAlexW4319315198
LanguageEN
Citations received7
References cited8

We ask three questions about the connection between monetary policy and inequality. First, does monetary policy affect inequality? While different households respond to changes in monetary policy for different reasons, we argue that the overall consumption effects are relatively evenly distributed across households. Second, does household heterogeneity change our understanding of monetary policy transmission? A more careful account of microeconomic consumption behavior materially alters our understanding of transmission channels, but has rather limited effect on our general view of the aggregate effects of monetary policy. Third, does inequality affect the optimal conduct of monetary policy? Since monetary policy is a rather blunt distributional tool, we argue that even a central bank with an explicit distributional mandate would not deviate much from conventional policy prescriptions

Aggregate demand · Economics · Inequality · Macroeconomics · Mandate · Monetary economics · Monetary policy · Economic, financial, and policy analysis · Fiscal Policies and Political Economy · Monetary Policy and Economic Impact

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