Monetary Policy and Racial Inequality

Alina K. Bartscher, Moritz Kuhn, Moritz Schularick and Paul Wachtel
Additional contact information
Alina K. Bartscher: Danmarks Nationalbank
Moritz Kuhn: University of Bonn
Moritz Schularick: University of Bonn
Paul Wachtel: New York University Stern School of Business

Brookings Papers on Economic Activity, 2022, vol. 53, issue 1 (Spring), 1-63

Abstract: This paper aims at an improved understanding of the relationship between monetary policy and racial inequality. We investigate the distributional effects of monetary policy in a unified framework, linking monetary policy shocks both to earnings and wealth differentials between Black and white households. Specifically, we show that, although an accommodative monetary policy shock increases employment for Black households more than for white households, the overall effects on earnings are small. At the same time, an accommodative monetary policy shock has large effects on the wealth difference between Black and white households, because Black households own fewer assets that appreciate in value. This suggests an important trade-off if policymakers aim to reduce racial inequalities.

Keywords: monetary policy; racial inequality; interest rates; Black households; income and wealth (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:bin:bpeajo:v:53:y:2022:i:2022-01:p:1-63

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