Shopping behavior and the effect of monetary policy on inflation heterogeneity along the income distribution

Miguel 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)
JEL-codes: D30 E31 E52 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393224000710
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

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
Bibliographic data for series maintained by Catherine Liu ().