Type
Working paper
Title
Income inequality and monetary policy in the Euro Area
In
OFCE working paper
Author(s)
CREEL Jérôme - Observatoire français des conjonctures économiques (Author)
EL HERRADI Mehdi - Université Bordeaux Montaigne (Author)
Editor
Paris : OFCE
Collection
OFCE working paper : 20/2020
Keywords
Euro Area, Monetary policy, Income distribution, Panel VAR
Abstract
EN
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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