Monetary Policy and Inequality

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We analyze the distributional effects of monetary policy on income, wealth and consumption. We use administrative household-level data covering the entire population in Denmark over the period 1987-2014 and exploit a long-standing currency peg as a source of exogenous variation in monetary policy. We consistently find that gains from softer monetary policy in terms of income, wealth and consumption are monotonically increasing in the ex-ante income level. The distributional effects reflect systematic differences in exposure to the various channels of monetary policy, especially non-labor channels (e.g. leverage and risky assets). Our estimates imply that softer monetary policy increases income inequality.
TidsskriftThe Journal of Finance
Udgave nummer5
Sider (fra-til)2945-2989
StatusUdgivet - 2023

ID: 324233878