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The Effectiveness of Monetary and Fiscal Policy Shocks on U.S. Inequality: The Role of Uncertainty

Goodness Aye (), Matthew Clance () and Rangan Gupta ()
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Goodness Aye: Department of Economics, University of Pretoria, Pretoria, South Africa

No 201782, Working Papers from University of Pretoria, Department of Economics

Abstract: The study examines the effect of monetary and fiscal policy on inequality conditioned on low and high uncertainty. We use U.S. quarterly time series data on different measures of income, labour earnings, consumption and total expenditure inequality as well as economic uncertainty. Our analysis is based on the impulse responses from the local projection methods that enable us to recover a smoothed average of the underlying impulse response functions. The results show that both contractionary monetary and fiscal policies increase inequality, and in the presence of relatively higher levels of uncertainty, the effectiveness of both policies is weakened. Thus, pointing to the need for policy-makers to be aware of the level of uncertainty while conducting of economic policies in the U.S.

Keywords: Inequality; Monetary and Fiscal Policies; Uncertainty (search for similar items in EconPapers)
JEL-codes: C22 E24 E40 E62 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2017-12
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Related works:
Journal Article: The effectiveness of monetary and fiscal policy shocks on U.S. inequality: the role of uncertainty (2019) Downloads
Working Paper: The Effectiveness of Monetary and Fiscal Policy Shocks on U.S. Inequality: The Role of Uncertainty (2018) Downloads
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