EconPapers    
Economics at your fingertips  
 

Monetary Policy and Inequality in Mexico

Francisco Villarreal

MPRA Paper from University Library of Munich, Germany

Abstract: Despite growing interest regarding the distributive impact of macroeconomic policies, the relationship between monetary policy and inequality has received relatively little attention in the literature. This is partly explained by the fact that the workhorse model used for monetary policy analysis summarises the demand-side of the economy by means of a representative agent, whose welfare is the normative criterion of optimal policy. However, alternative formulations using incomplete market models which feature heterogeneous agents, indicate that monetary policy does have an effect on the distribution of income, consumption and wealth, which potentially has implications for the design and conduct of optimal policy. The document empirically investigates the nature of the relationship between monetary policy and household income inequality in Mexico. The ultimate purpose is to uncover certain regularities which characterise the relationship, which can eventually serve as stylised facts for the design of theoretical models. The response of household's income inequality, and its components, to monetary policy shocks indicate that unanticipated increases in the nominal interest rate are correlated with a reduction of household income inequality in the short run, and that the effect dissipates over a two-year horizon. The results are robust to the particular measure of inequality used, as well as the procedure used to identify the policy shocks.

Keywords: Monetary Policy; Income Distribution; Small Open Economy (search for similar items in EconPapers)
JEL-codes: C1 D3 E5 (search for similar items in EconPapers)
Date: 2014-06-30
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (20)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/57074/1/MPRA_paper_57074.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/84588/1/MPRA_paper_84588.pdf revised version (application/pdf)

Related works:
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:pra:mprapa:57074

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().

 
Page updated 2025-03-19
Handle: RePEc:pra:mprapa:57074