Does wealth inequality affect the transmission of monetary policy?

Alexander Matusche and Johannes Wacks

Journal of Macroeconomics, 2023, vol. 75, issue C

Abstract: We provide evidence that higher wealth inequality between households is associated with stronger real effects of monetary policy. First, we use state-dependent local projections to show that the US and the UK exhibited stronger real effects of monetary policy in times of higher wealth inequality. Second, we measure wealth inequality within US states and document that economic activity responds more strongly to interest rate changes in states where wealth is distributed more unequally. Third, we show that ECB monetary policy has stronger real effects in Euro Area countries with higher wealth inequality.

Keywords: Wealth inequality; Monetary policy; State dependence (search for similar items in EconPapers)
JEL-codes: D31 E21 E22 E52 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:75:y:2023:i:c:s0164070422000672

DOI: 10.1016/j.jmacro.2022.103474

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