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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

No 519, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: While a growing line of research has assessed the distributional consequences of monetary policy, most of these studies rely on survey-based estimates of inequality and feature a shorter time coverage. This paper examines the distributional implications of monetary policy on top income shares in 12 advanced economies between 1920 and 2015. We exploit the implications of the macroeconomic policy trilemma with an external instrument approach to identify exogenous variations in monetary conditions. The obtained results indicate that contractionary monetary policy strongly decreases the share of national income held by the top one percent and vice versa, irrespective of the state of the economy. Our findings also suggest that the effect of monetary tightening on top income shares is likely to be channeled via lower asset prices.

Keywords: Monetary policy; Top income shares; Macroeconomic Policy Trilemma; External Instrument. (search for similar items in EconPapers)
JEL-codes: E25 E42 E52 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2020-01
New Economics Papers: this item is included in nep-his, nep-mac and nep-mon
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http://www.ecineq.org/milano/WP/ECINEQ2020-519.pdf (application/pdf)

Related works:
Working Paper: Monetary Policy and the Top One Percent: Evidence from a Century of Modern Economic History (2022)
Working Paper: Monetary policy and the top one percent: Evidence from a century of modern economic history (2020) Downloads
Working Paper: Monetary policy and the top one percent: Evidence from a century of modern economic history (2020) Downloads
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