Central Bank Policies and Income and Wealth Inequality: A Survey

33 Pages Posted: 28 May 2020

See all articles by Andrea Colciago

Andrea Colciago

De Nederlandsche Bank - Research Department; Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

Anna SamarIna

De Nederlandsche Bank

Jakob de Haan

University of Groningen - Faculty of Economics and Business; De Nederlandsche Bank; CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: September 2019

Abstract

This paper reviews recent research on the relationship between central bank policies and inequality. A new paradigm which integrates sticky‐prices, incomplete markets, and heterogeneity among households is emerging, which allows for the joint study of how inequality shapes macroeconomic aggregates and how macroeconomic shocks and policies affect inequality. The new paradigm features multiple distributional channels of monetary policy. Most empirical studies, however, analyze each potential channel of redistribution in isolation. Our review suggests that empirical research on the effects of conventional monetary policy on income and wealth inequality yields mixed findings, although there seems to be a consensus that higher inflation, at least above some threshold, increases inequality. In contrast to common wisdom, conclusions concerning the impact of unconventional monetary policies on inequality are also not clear cut. To better understand policy effects on inequality, future research should focus on the estimation of General Equilibrium models with heterogeneous agents.

Keywords: Income inequality, Macroprudential policy, Monetary policy, Wealth inequality

Suggested Citation

Colciago, Andrea and SamarIna, Anna and de Haan, Jakob, Central Bank Policies and Income and Wealth Inequality: A Survey (September 2019). Journal of Economic Surveys, Vol. 33, Issue 4, pp. 1199-1231, 2019, Available at SSRN: https://ssrn.com/abstract=3608919 or http://dx.doi.org/10.1111/joes.12314

Andrea Colciago (Contact Author)

De Nederlandsche Bank - Research Department ( email )

P.O. Box 98
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Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS) ( email )

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Italy

Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

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Milano, 20126
Italy

Anna SamarIna

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

Jakob De Haan

University of Groningen - Faculty of Economics and Business ( email )

PO Box 800
Groningen, 9700 AV
Netherlands
+31 0 50 3633706 (Fax)

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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