On the Effects of Monetary Policy Shocks on Income and Consumption Heterogeneity

Minsu Chang and Frank Schorfheide

No 32166, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper we use the functional vector autoregression (VAR) framework of Chang, Chen, and Schorfheide (2024) to study the effects of monetary policy shocks (conventional and informational) on the cross-sectional distribution of U.S. earnings (from the Current Population Survey), consumption, and financial income (both from the Consumer Expenditure Survey). We find that a conventional expansionary monetary policy shock reduces earnings inequality, in large part by lifting individuals out of unemployment. There is a weakly positive effect on consumption inequality and no effect on financial income inequality, but credible bands are wide.

JEL-codes: C11 C32 C52 E32 (search for similar items in EconPapers)
Date: 2024-02
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Working Paper: On the Effects of Monetary Policy Shocks on Income and Consumption Heterogeneity (2024)
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