For whom the bill tolls: redistributive consequences of a monetary-fiscal stimulus

Michal Brzoza-Brzezina, Julia Jabłońska, Marcin Kolasa and Krzysztof Makarski

No 2024-097, KAE Working Papers from Warsaw School of Economics, Collegium of Economic Analysis

Abstract: During the COVID-19 pandemic, governments in the euro area sharply increased spending, while the European Central Bank eased financing conditions. We use this episode to assess how such a concerted monetary-fiscal stimulus redistributes welfare between various age cohorts. Our assessment involves not only the income side of household balance sheets (mainly direct effects of transfers), but also the more obscure financing side that, to a substantial degree, occurred via indirect effects (with a prominent role of the inflation tax). Using a quantitative life-cycle model, we document that young households benefited from the stimulus, while the bill was mainly paid by middle-aged and older agents. Crucially, most welfare redistribution was due to indirect effects related to macroeconomic adjustment that resulted from the stimulus. As a consequence, even though all age cohorts received significant transfers, welfare of some actually decreased.

Keywords: COVID-19; Fiscal expansion, Monetary policy, Redistribution (search for similar items in EconPapers)
JEL-codes: E31 E51 E52 H5 J11 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2024-02
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge and nep-mon
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Working Paper: For whom the bill tolls: redistributive consequences of a monetary-fiscal stimulus (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:sgh:kaewps:2024097

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