Should Inequality Factor into Central Banks' Decisions?

Niels-Jakob Hansen, Alessandro Lin and Rui Mano

No 2020/196, IMF Working Papers from International Monetary Fund

Abstract: Inequality is increasingly a concern. Fiscal and structural policies are well-understood mitigators. However, less is known about the potential role of monetary policy. This paper investigates how inequality matters for monetary policy within a tractable Two-Agent New Keynesian model that captures important dimensions of inequality. We find some support for making inequality an explicit target for monetary policy, particularly if central banks follow standard Taylor rules.

Keywords: WP; consumption inequality; inequality gap; inflation gap; optimal monetary policy; labor income (search for similar items in EconPapers)
Pages: 39
Date: 2020-09-25
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Citations: View citations in EconPapers (7)

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