Microdata for Macro Models: the Distributional Effects of Monetary Policy

Luisa Corrado and Daniela Fantozzi ()
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Daniela Fantozzi: National Statistical Institute (Istat)

No 491, CEIS Research Paper from Tor Vergata University, CEIS

Abstract: In this paper we investigate the effect of standard and non-standard monetary policy implemented by the ECB on income inequality in Italy. We use for the first time the survey microdata on Income and Living Conditions (EU-SILC, Istat) in a repeated cross-section experiment to build measures of inequality and the distribution over time for incomes and subgroups of individuals. The identification strategy is based on surprises estimated in the EA-MPD database for the Euro Area. Using a battery of Local Projections, we evaluate the impact of monetary policy by comparing the performance of the impulse response functions of our inequality measures in different policy scenarios (pre and post-QE). The main findings show that an expansionary unconventional monetary policy shock compressed inequality of disposable and labor income more persistently than a conventional monetary shock. The financial channel has an equalizing effect favoring the less wealthy households mainly in the long-run. Overall, our evidence suggests that QE is associated with a decrease in Italian households inequality.

Keywords: Income Inequality; Monetary Policy; Local Projections; Survey Data; High Frequency Data. (search for similar items in EconPapers)
JEL-codes: C81 D31 E52 E58 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2020-06-03, Revised 2020-06-03
New Economics Papers: this item is included in nep-cba, nep-eec, nep-mac and nep-mon
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