Computational evidence on the distributive properties of monetary policy

Siyan Chen and Saul Desiderio

No 2018-38, Economics Discussion Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: Empirical studies have pointed out that monetary policy may significantly affect income and wealth inequality. To investigate the distributive properties of monetary policy the authors resort to an agent-based macroeconomic model where firms, households and one bank interact on the basis of limited information and adaptive rules-of-thumb. Simulations show that the model can replicate fairly well a number of stylized facts, specially those relative to the business cycle. The authors address the issue using three types of computational experiments, including a global sensitivity analysis carried out through a novel methodology which greatly reduces the computational burden of simulations. The result emerges that a more restrictive monetary policy increases inequality, even though this effect may differ across groups of households. This may put into question the principle of the independence of central banks. In addition, this effect appears to be attenuated if the bank's willingness to lend is lower.

Keywords: economic inequality; monetary policy; agent-based models; NK-DSGE models; stock-flow consistency; global sensitivity analysis (search for similar items in EconPapers)
JEL-codes: C63 D31 D50 E52 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-cba, nep-cmp, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Journal Article: Computational evidence on the distributive properties of monetary policy (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwedp:201838

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