Download this Paper Open PDF in Browser

The Redistributive Effects of Monetary Policy

University of Zurich Department of Economics Working Paper No. 44

24 Pages Posted: 12 Nov 2011  

Olivier Ledoit

University of Zurich - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: October 31, 2011

Abstract

We introduce a model of the economy as a social network. Two agents are linked to the extent that they transact with each other. This generates well-defi ned topological notions of location, neighborhood and closeness. We investigate the implications of our model for monetary economics. When a central bank increases the money supply, it must inject the money somewhere in the economy. We demonstrate that the agent closest to the location where money is injected is better off, and the one furthest is worse off . This redistribution channel is independent from the ones previously noted in the literature. Symmetrically, any decrease in the money supply redistributes purchasing power in the other direction. We also outline the testable implications of our model.

Keywords: Money, redistribution, policy, central bank, social network, topology

JEL Classification: E40, E50

Suggested Citation

Ledoit, Olivier, The Redistributive Effects of Monetary Policy (October 31, 2011). University of Zurich Department of Economics Working Paper No. 44. Available at SSRN: https://ssrn.com/abstract=1958202 or http://dx.doi.org/10.2139/ssrn.1958202

Olivier Ledoit (Contact Author)

University of Zurich - Department of Economics ( email )

Wilfriedstrasse 6
Z├╝rich, 8032
Switzerland

Paper statistics

Downloads
84
Rank
182,727
Abstract Views
500