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Monetary policy and the top one percent: Evidence from a century of modern economic history

Mehdi El Herradi and Aurélien Leroy

DNB Working Papers from Netherlands Central Bank, Research Department

Abstract: This paper examines the distributional implications of monetary pol-icy from a long-run perspective with data spanning a century of modern economic history in 12 advanced economies between 1920 and 2015. We employ two complementary empirical methodologies for estimating the dynamic responses of the top 1% income share to a monetary policy shock: vector auto-regressions and local projections. We notably exploit the implications of the macroeconomic policy trilemma to identify exogenous variations in monetary conditions. The obtained results indicate that ex-pansionary monetary policy strongly increases the share of national income held by the top one percent. Our findings also suggest that this e?ect is arguably driven by higher asset prices, and holds irrespective of the state of the economy.

Keywords: Monetary policy; Income inequality; Local projections; Panel VAR (search for similar items in EconPapers)
JEL-codes: D63 E62 E64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-his and nep-mac
Date: 2019-04
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Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:632

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