Distributional effects of monetary policy on wealth inequality in developing Asia

Warawut Ruankham and Yuthana Sethapramote

International Journal of Monetary Economics and Finance, 2025, vol. 18, issue 5, 376-393

Abstract: Building upon research primarily conducted in more advanced economies, this study broadens the investigation of the distributional effects of monetary policy and wealth inequality in developing Asia, with a specific focus on long-term cointegration between monetary policy and inequality. Utilising inequality data from the World Inequality Database during 2000-2021, we provide a comprehensive examination of the distributional effects of monetary policy on wealth inequality in nine developing countries in Asia who adopted inflation targeting monetary policy framework. Employing the Panel Vector Auto Regressive and the Auto Regressive Distributed Lag models, our findings reveal that expansionary monetary policy, characterised by lower interest rates and higher inflation, exacerbates long-term disparities in personal wealth. These results underscore the importance of central banks addressing the distributional consequences of their policies and incorporating inequality considerations into their long-term monetary objectives.

Keywords: monetary policy; distributional effect; wealth inequality; time series analysis; developing Asia; panel VAR. (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijmefi:v:18:y:2025:i:5:p:376-393

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