The inequality channel of monetary transmission
Waldyr Areosa () and
Marta B.M. Areosa
Journal of Macroeconomics, 2016, vol. 48, issue C, 214-230
We examine optimal monetary policy in the presence of inequality by introducing unskilled agents with no access to the financial system into a DSGE model with sticky prices. Our main results are: (i) a contractionary interest rate shock increases inequality, while inflation and the output gap fall; (ii) the welfare-based objective of monetary policy includes inequality stabilization; (iii) as the proportion of unskilled agents increases, welfare decreases; and (iv) under scarcity of skilled agents, monetary policy is weakened, while fiscal policy produces a more relevant impact on the economy.
Keywords: Inequality; Optimal monetary policy; Interest rate variability; Fiscal policy (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: The Inequality Channel of Monetary Transmission (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:48:y:2016:i:c:p:214-230
Access Statistics for this article
Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos
More articles in Journal of Macroeconomics from Elsevier
Series data maintained by Dana Niculescu ().