Computational evidence on the distributive properties of monetary policy

Siyan Chen and Saul Desiderio

Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), 2018, vol. 12, No 2018-62, 32 pages

Abstract: Empirical studies have pointed out that monetary policy may significantly affect income and wealth inequality. To investigate the distributive properties of monetary policy the authors resort to an agent-based macroeconomic model where firms, households and one bank interact on the basis of limited information and adaptive rules-of-thumb. Simulations show that the model can replicate fairly well a number of stylized facts, especially those relative to the business cycle. The authors address the issue using three types of computational experiments, including a global sensitivity analysis carried out through a novel methodology which greatly reduces the computational burden of simulations. The result emerges that a more restrictive monetary policy increases inequality, even though this effect may differ across groups of households. In addition, it appears to be attenuated if the bank's willingness to lend is lower. The overall analysis suggests that inequality can constitute valuable information also for central banks.

Keywords: Economic inequality; monetary policy; agent-based models; NK-DSGE models; stock-flow consistency; global sensitivity analysis (search for similar items in EconPapers)
JEL-codes: C63 D31 D50 E52 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (5)

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Working Paper: Computational evidence on the distributive properties of monetary policy (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifweej:201862

DOI: 10.5018/economics-ejournal.ja.2018-62

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