Wealth distribution and monetary policy
Ludmila Fadejeva and
Zeynep Kantur ()
No 2020/03, Working Papers from Latvijas Banka
Abstract:
We observe differences in the net wealth distribution by age among European countries. The net wealth distribution in Western EU countries is consistent with the life cycle hypothesis. However, in Eastern EU countries, the wealth distribution is skewed towards younger ages. The aim of the paper is twofold: first, we study the characteristics of economies leading to differences in the net wealth distribution by age; second, we evaluate the impact of these differences on the transmission of monetary policy. To do so, we develop a modified New Keynesian model where the demand side is represented by a multi-period overlapping generation setup, and the supply side of the economy follows the New Keynesian framework. The model is used to analyse the interaction between monetary policy and wealth accumulation originated by demographics and the productivity gap among generations in a coherent general equilibrium model. The HFCS database is used to calibrate the model for two groups of European countries. We find that the shape of net wealth distribution by age has an important bearing on the effectiveness and hence conduct of monetary policy.
Keywords: overlapping generations model; New Keynesian model; wealth distribution; monetary policy (search for similar items in EconPapers)
JEL-codes: E32 E52 J11 (search for similar items in EconPapers)
Date: 2020-09-16
New Economics Papers: this item is included in nep-dge, nep-eec, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://datnes.latvijasbanka.lv/papers/wp_3_2020_en.pdf (application/pdf)
Related works:
Journal Article: Wealth distribution and monetary policy (2023) 
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:ltv:wpaper:202003
Access Statistics for this paper
More papers in Working Papers from Latvijas Banka Contact information at EDIRC.
Bibliographic data for series maintained by Konstantins Benkovskis ().