 Shopping behavior and the effect of monetary policy on inflation heterogeneity along the income distributionMiguel Ampudia, Michael Ehrmann and Georg Strasser Journal of Monetary Economics, 2024, vol. 148, issue C Abstract: This paper studies the effect of monetary policy on inflation along the income distribution in the euro area and shows that monetary policy has differential effects. In response to monetary tightenings, high-income households engage in more intense product substitution and trade down in the product and store space relative to low-income households, such that their inflation responds relatively more. This channel stands in contrast to the effect arising from different consumption bundles, which imply that the inflation experienced by high-income households responds less to monetary policy. The paper also reveals substantial cross-country heterogeneity, with the product substitution channel being more pronounced in countries where price differences between possible substitutes are larger. Keywords: Inflation; Distributional effects; Monetary policy; Shopping behavior; Substitution (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:148:y:2024:i:c:s0304393224000710 DOI: 10.1016/j.jmoneco.2024.103618 Access Statistics for this article Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser More articles in Journal of Monetary Economics from Elsevier |
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