Minority Inflation, Unemployment, and Monetary Policy

Munseob Lee, Claudia Macaluso and Felipe Schwartzman

No 24-16, Working Paper from Federal Reserve Bank of Richmond

Abstract: Our paper addresses the heterogeneous effects of monetary policy on households of different races. The cyclical volatility of real income differs significantly for households of different races and income levels, reflecting differential exposure to fluctuations in employment and consumer prices. All Black households are disproportionately affected by employment fluctuations, whereas price volatility is only particularly pronounced for Black households with income above the national median. The latter face 40 percent higher price volatility than both poorer households of the same race and white households of similar income. To evaluate the effects of policy, we propose a New Keynesian framework with heterogeneous exposure to employment and price volatility. We find that an accommodative monetary stance generates asymmetric outcomes within race groups. Low-income households experience unemployment stabilization benefits, while high-income ones incur real income volatility costs. Differences are especially large among Black households. Reducing the volatility of unemployment by 1 percentage point engenders a 1.17 percentage point reduction in overall income volatility for poorer Black households, but an increase of 0.6 percentage points in income volatility for richer Black households.

Keywords: inflation; monetary policy; Employment and labor markets; economic inequality (search for similar items in EconPapers)
Date: 2024-12
New Economics Papers: this item is included in nep-cba, nep-dge, nep-lab and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.richmondfed.org/-/media/RichmondFedOrg ... ers/2024/wp24-16.pdf Working Paper (application/pdf)

Related works:
Working Paper: Minority Inflation, Unemployment, and Monetary Policy (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedrwp:99275

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Paper from Federal Reserve Bank of Richmond Contact information at EDIRC.
Bibliographic data for series maintained by Christian Pascasio ().