Monetary Policy and Inequality |
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| Authors: | ASGER LAU ANDERSEN NIELS JOHANNESEN MIA JØRGENSEN JOSÉ-LUIS PEYDRÓ |
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| Institution: | 1. Correspondence: Niels Johannesen, Department of Economics, University of Copenhagen, Copenhagen, 1353, Denmark;2. e-mail: niels.johannesen@econ.ku.dk.;3. Asger Lau Andersen is with the University of Copenhagen, CEBI, and DFI. Niels Johannesen is with the University of Copenhagen, CEBI, DFI, and CEPR. Mia Jørgensen is with the University of Copenhagen and CEBI. José-Luis Peydró is with the Imperial College, UPF-BSE-CREI-ICREA, and CEPR. We thank Stefan Nagel (Editor) and two anonymous referees;4. Manuel Amador;5. Christina Arellano;6. Adrien Auclert;7. Javier Bianchi;8. Markus Brunnermeier;9. Martin Eichenbaum;10. Jordi Galí;11. Mikhail Golosov;12. Yuriy Gorodnichenko;13. Veronica Guerrieri;14. Søren Hove Ravn;15. Pat Kehoe;16. Narayana Kocherlakota;17. Keith Kuester;18. Benjamin Moll;19. Christian Moser;20. Elena Pastorino;21. Fabrizio Perri;22. Giacomo Ponzetto;23. Kjetil Storesletten;24. Jaume Ventura;25. Gianluca Violante;26. Annette Vissing-Jørgensen;27. Arlene Wong;28. seminar audiences at the European University Institute, Federal Reserve Board, Danish Central Bank, Minneapolis Federal Reserve, University of Copenhagen, Boston University, and Universitat Pompeu Fabra/CREI;29. and participants at the NBER Summer Institute, CEPR macro conference, the annual conference of the Danish Financial Institute, the Workshop on Recent Developments in Macroeconomic Modelling at CREI for valuable comments and suggestions. The Center for Economic Behavior and Inequality (CEBI) at the University of Copenhagen is supported by Danish National Research Foundation Grant DNRF134. Financial support from AEI/FEDER, UE-PGC2018-102133-B-I00, and the European Research Council, Grant No. 648398, is gratefully acknowledged. Peydró also acknowledges financial support from the Spanish Ministry of Science and Innovation, through the Severo Ochoa Programme for Centres of Excellence in R&D (CEX2019-000915-S). Andersen and Johannesen gratefully acknowledge support from the Danish Finance Institute (DFI). None of the authors has conflicts of interest to declare. |
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| Abstract: | We analyze the distributional effects of monetary policy on income, wealth, and consumption. We use administrative household-level data covering the entire population in Denmark over the period 1987 to 2014 and exploit a long-standing currency peg as a source of exogenous variation in monetary policy. We find that gains from softer monetary policy in terms of income, wealth, and consumption are monotonically increasing in ex ante income. The distributional effects reflect systematic differences in exposure to the various channels of monetary policy, especially nonlabor channels (e.g., leverage and risky assets). Our estimates imply that softer monetary policy increases income inequality. |
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