Monetary policy and the top one percent: Evidence from a century of modern economic history

Mehdi El Herradi () and Aurélien Leroy

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Abstract: This paper examines the distributional e ects of monetary policy in 12 OECD economies between 1920 and 2016. We exploit the implications of the macroeconomic policy trilemma with an external instrument approach to analyse how top income shares respond to monetary policy shocks. The results indicate that monetary tightening strongly decreases the share of national income held by the top one percent and vice versa for a monetary expansion, irrespective of the position of the economy. This e ect (i) holds for the top percentile and the ultra-rich (top 0.1% and 0.01% income shares), while (ii) it does not necessarily induce a decrease in income inequality when considering the entire income distribution. Our ndings also suggest that the e ect of monetary policy on top income shares is likely to be channeled via real asset returns.

Keywords: monetary policy; top incomes; macroeconomic policy trilemma; external instrument (search for similar items in EconPapers)
Date: 2020-12-16
New Economics Papers: this item is included in nep-his and nep-mon
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03080162
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Related works:
Working Paper: Monetary Policy and the Top One Percent: Evidence from a Century of Modern Economic History (2022)
Working Paper: Monetary policy and the top one percent: Evidence from a century of modern economic history (2020)
Working Paper: Monetary policy and the top one percent: Evidence from a century of modern economic history (2020)
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