Monetary policy and the persistent aggregate effects of wealth redistribution

Martin Kuncl and Alexander Ueberfeldt

Journal of Monetary Economics, 2024, vol. 144, issue C

Abstract: Monetary easing redistributes from savers, some of whom are retired and not adjusting labor supply, to borrowers who reduce their labor supply. This results in persistently lower aggregate labor and output. Hence the interaction of labor supply heterogeneity with heterogeneity in net nominal positions of households creates a monetary policy trade-off whereby short-term economic stimulus is followed by lower output over the medium term. The policy trade-off is stronger in economies with more nominal household debt and a larger wealth share of retired households but weakened by a more aggressive monetary policy stance and under price-level targeting.

Keywords: Monetary policy transmission; Monetary policy framework; Household heterogeneity; Fisher channel (search for similar items in EconPapers)
JEL-codes: E21 E50 (search for similar items in EconPapers)
Date: 2024
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Working Paper: Monetary Policy and the Persistent Aggregate Effects of Wealth Redistribution (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:144:y:2024:i:c:s0304393223001599

DOI: 10.1016/j.jmoneco.2023.12.003

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