Monetary policy shocks and inflation inequality

Christoph Lauper () and Giacomo Mangiante ()
Additional contact information
Christoph Lauper: University of Lausanne
Giacomo Mangiante: Bank of Italy

No 1474, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: This paper studies how monetary policy shocks influence the distribution of U.S. household-level inflation rates. We find that contractionary monetary policy shocks significantly and persistently decrease inflation dispersion in the economy. Moreover, different demographic groups are affected heterogeneously by monetary policy. Due to the different consumption baskets purchased, low- and middle-income households experience higher median inflation rates, which are at the same time more responsive to a contractionary monetary shock, leading to an overall convergence of inflation rates across income groups. The same result holds for expenditure and salary groups. The expenditures on energy, water and gasoline are the main drivers behind these results. These findings imply that the impact of monetary policy shocks on expenditure inequality is between 20% and 30% more muted once we control for differences in individual inflation rates. Overall, our empirical evidence highlights the importance of inflation heterogeneity in studying the distributional consequences that monetary policies can have.

Keywords: monetary policy; inflation inequality; distributional effects (search for similar items in EconPapers)
JEL-codes: E31 E52 (search for similar items in EconPapers)
Date: 2024-12
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bancaditalia.it/pubblicazioni/temi-dis ... 474/en_tema_1474.pdf (application/pdf)

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:bdi:wptemi:td_1474_24

Access Statistics for this paper

More papers in Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by ().