The Effect of Monetary Policy on Income Inequality: Empirical Evidence from Asian and African Developing Economies

Zulfiqar Khan () and Muhammad Azam Khan
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Zulfiqar Khan: Department of Economics, Faculty of Business and Economics, Abdul Wali Khan University Mardan, KP-Pakistan
Muhammad Azam Khan: Department of Economics, Faculty of Business & Economics, Abdul Wali Khan University Mardan, Khyber Pakhtunkhwa, Pakistan

Journal of Central Banking Theory and Practice, 2023, vol. 12, issue 3, 133-158

Abstract: Inequality is a challenging issue for all developing countries across the globe. Evaluating the role of monetary policy in mitigating inequality is imperative for researchers and policy makers. The central objective of the present study is to empirically evaluate the impact of monetary policy on income inequality for ten Asian and African developing economies from 1990–2020. The methods of pooled mean group (PMG)/panel autoregressive distributed lag (ARDL), and fully modified least square (FMOLS) are implemented. The empirical results indicate that money supply has negative, and inflation has a positive and significant influence on income inequality. It has also been found that GDP per capita income and inward foreign direct investment (FDI) have a negative impact on inequality. The findings of the present study recommend that money supply, per capita income, and inward FDI should be enhanced, while inflation must be controlled using coordinated fiscal and monetary policies.

Keywords: Monetary policy; income inequality; panel ARDL; Asian and African countries (search for similar items in EconPapers)
JEL-codes: C33 E00 E25 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:cbk:journl:v:12:y:2023:i:3:p:133-158

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