Income Distribution and Monetary Policy in Small Open Economies

Christopher Malikane

The IUP Journal of Monetary Economics, 2007, vol. V, issue 1, 6-18

Abstract: This paper investigates the role of income distribution in a small monetary model for policy analysis and assesses whether a central bank in a small open economy can improve economic performance by paying explicit attention to changes in income distribution. The study answers this question by reformulating a Ball-Svensson type macromodel, extended to incorporate both sluggish nominal wage and price adjustment and income distribution effects on aggregate demand. Further, it is observed that a simple price inflation targeting rule that does not react explicitly to changes in income distribution is incapable of achieving macrostability. The study shows that a simple rule that targets the productivity-adjusted nominal wage inflation rate is capable of achieving macrostability. These findings motivate income distribution sensitive monetary policy rules.

Date: 2007
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:icf:icfjmo:v:05:y:2007:i:1:p:6-18

Access Statistics for this article

More articles in The IUP Journal of Monetary Economics from IUP Publications
Bibliographic data for series maintained by G R K Murty ().