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Income inequality and monetary policy in the Euro Area

Abstract : This paper examines the distributional implications of monetary policy, either standard, non-standard or both, on income inequality in 10 Euro Area countries over the period 2000-2015. We use three different indicators of income inequality in a Panel VAR setting in order to estimate IRFs of inequality to a monetary policy shock. The identification of monetary shocks follows a one-step procedure and relies only on country-specific determinants of income distribution. Results suggest that: (i) the distributional effects of ECB’s monetary policy have been modest and (ii) mainly driven in times of conventional monetary policy measures, especially in countries with a high level of market inequalities, while, overall, (iii) standard and non-standard monetary policies do not significantly differ in terms of impact on income inequality. Results are robust to alternative data sources either for income distribution or for non-standard monetary policies.
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Submitted on : Wednesday, October 20, 2021 - 10:52:01 PM
Last modification on : Monday, March 21, 2022 - 2:48:20 PM
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Jérôme Creel, Mehdi El Herradi. Income inequality and monetary policy in the Euro Area. 2020. ⟨hal-03389183⟩

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