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An Empirical Assessment of Monetary Policy Channels in Income and Wealth Disparities

José Alves () and Tomás Silva ()
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Tomás Silva: University of Lisbon

Comparative Economic Studies, 2021, vol. 63, issue 3, No 6, 432-449

Abstract: Abstract Our paper aims at analysing the relation between monetary policy (MP) and its transmission channels in both income and wealth inequality for the Euro Area between 1999 and 2017. We analysed three main representative MP channels (income, portfolio and earnings heterogeneity) that might explain how MP decisions may affect wealth and income distribution and the aggregate effect thereof. Although we used different measures of income inequality, we do not have sufficient data on wealth inequality. In this case, we propose an alternative measure that can translate the unequal pace of capital accumulation among households. The results we reached indicate that the increase in asset prices, mainly equity, seems to be relevant to explain an increase in income inequality. On the other hand, it seems that the declining unemployment due to MP measures helped avoid a higher increase in income inequality in the Euro Area.

Keywords: Income inequalities; Wealth inequalities; Monetary policy; Transmission channels (search for similar items in EconPapers)
JEL-codes: C23 D31 E25 E52 E58 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1057/s41294-021-00149-0

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