The Curious Incidence of Monetary Policy Across the Income Distribution

Tobias Broer (), John Kramer () and Kurt Mitman
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Tobias Broer: Paris School of Economics, IIES, Stockholm University, and CEPR
John Kramer: IIES, Stockholm University

No 416, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: We use high-frequency administrative data from Germany to study the effects of monetary policy on income and employment across the earnings distribution. Earnings growth at the bottom of the distribution is substantially more elastic to policy shocks. This unequal incidence is driven by differences in the response of employment risk across the distribution: job loss is more countercyclical for lower-earnings households. Viewed through the lens of a standard incomplete-markets model, the heterogeneous incidence substantially amplifies the equilibrium response of aggregate consumption to shocks.

Keywords: Inequality; Monetary Policy; Heterogeneous agents (search for similar items in EconPapers)
JEL-codes: D31 E52 J64 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2022-08-01
New Economics Papers: this item is included in nep-cba, nep-eur and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Working Paper: The Curious Incidence of Monetary Policy Across the Income Distribution (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0416

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