Go to Top

Differences in consumption baskets across households and the distributional consequences of monetary policy

Javier Cravino, Ting Lan, Andrei Levchenko, (2018), “Differences in consumption baskets across households and the distributional consequences of monetary policy”, VoxEU, 16 June

There is growing recognition that monetary policy shocks have distributional consequences. An active literature argues that monetary policy can have differential effects across various types of agents – savers versus borrowers (Doepke and Schneider 2006), the financially constrained versus the unconstrained (Williamson 2008), or young versus old (Wong 2016). In turn, the heterogeneity in the impact of monetary policy across agents can determine its overall effectiveness (Auclert 2017, Beraja et al. 2017, Kaplan et al. 2018). Coibion et al. (2017) show empirically that monetary contractions increase both income and consumption inequality. In all of these contributions, the distributional consequences of monetary policy arise from its heterogeneous impact on the value of agents’ income or wealth.

Relevant Posts