Monetary Policy and Inequality: A Two-way Relation
Luzie Thiel ()
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Luzie Thiel: University of Kassel
MAGKS Papers on Economics from Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung)
We study the transmission of monetary policy in the presence of heterogeneous households and examine the implications when the share of constrained households is a function of monetary policy. We build an analytically tractable heterogeneous agent New Keynesian model (THANK) with an endogenous share of hand-to-mouth households. The transmission of monetary policy on aggregate demand is amplified in this setup by inequality between saver and hand-to-mouth households. The amplification effect depends on monopolistic rents (enhancing) and redistribution (mitigating). Unlike most THANK models, we refrain from the assumption of a full insurance steady state.
Keywords: Monetary Policy; Heterogeneous Households; Inequality; Aggregate Demand; Complementarity; Financial Conditions; Imperfect Insurance (search for similar items in EconPapers)
JEL-codes: E12 E21 E44 E52 E58 (search for similar items in EconPapers)
Pages: 50 pages
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge and nep-mon
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Persistent link: https://EconPapers.repec.org/RePEc:mar:magkse:202304
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