Monetary Policy with Racial Inequality

Makoto Nakajima ()

No 23-09, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: I develop a heterogeneous-agent New-Keynesian model featuring racial inequality in income and wealth, and studies interactions between racial inequality and monetary policy. Black and Hispanic workers gain more from accommodative monetary policy than White workers mainly due to higher labor market risks. Their gains are larger also because of a larger proportion of them are hand-to-mouth, while wealthy White workers gain more from asset price appreciation. Monetary and fiscal policies are substitutes in providing insurance against cyclical labor market risks. Racial minorities gain even more from an accommodative monetary policy in the absence of income-dependent fiscal transfers.

Keywords: monetary policy; racial inequality; labor market; unemployment; wealth distribution; hand-to-mouth; marginal propensity to consume; business cycle; heterogeneous agents (search for similar items in EconPapers)
JEL-codes: E21 E52 J15 J64 (search for similar items in EconPapers)
Pages: 71
Date: 2023-05-30
New Economics Papers: this item is included in nep-dge, nep-inv and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Working Paper: Monetary Policy with Racial Inequality (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedpwp:96239

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DOI: 10.21799/frbp.wp.2023.09

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