Intergenerational Redistributive Effects of Monetary Policy

Price-Level Changes and the Redistribution of Nominal Wealth Across the Euro Area

Marcin Bielecki, Michal Brzoza-Brzezina and Marcin Kolasa

Journal of the European Economic Association, 2022, vol. 20, issue 2, 549-580

Abstract: This paper investigates the distributional consequences of monetary policy across generations. We use a life-cycle model with a rich asset structure as well as nominal and real rigidities, calibrated to the euro area using both macroeconomic aggregates and microeconomic evidence from the Household Finance and Consumption Survey. Life-cycle considerations allow to demonstrate the key role of maturing assets (in contrast to balance sheet holdings) for properly assessing the redistributive effects of monetary policy. The redistribution is mainly driven by nominal assets and labor income, less by real financial assets and housing. Overall, we find that a typical monetary policy easing redistributes welfare from older to younger generations, and decreases net worth inequality associated with life-cycle motives.

Date: 2022
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Working Paper: Intergenerational redistributive effects of monetary policy (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jeurec:v:20:y:2022:i:2:p:549-580.

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