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A benefit of monetary policy response to inequality

Kengo Nutahara

No 22-006E, CIGS Working Paper Series from The Canon Institute for Global Studies

Abstract: The main objective of this paper is to investigate a monetary policy response to inequality in a Two-Agent New Keynesian (TANK) model with hand-to-mouth households. I derive the analytical condition for equilibrium determinacy and show that a monetary policy response to inequality is helpful in achieving equilibrium de terminacy. On the other hand, the impulse responses to structural shocks show that a monetary policy response to inequality does not necessarily reduce the volatilities of both inflation and output although it mitigates the volatility of inequality.

Keywords: Inequality; monetary policy; TANK; hand-to-mouth; equilibrium in determinacy JEL classifications: E25; E31; E32; E52; E58 (search for similar items in EconPapers)
Pages: 42
Date: 2022-04
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac, nep-mon and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:cnn:wpaper:22-006e

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