The distributive effect of monetary policy: The top one percent makes the difference Articles uri icon



publication date

  • September 2017

start page

  • 106

end page

  • 118


  • 65

International Standard Serial Number (ISSN)

  • 0264-9993

Electronic International Standard Serial Number (EISSN)

  • 1873-6122


  • The paper evaluates the distributional effect of monetary policy. The empirical analysis is implemented for the USA, where the dynamics in income inequality is mainly driven by the variation in the top one percent
    of the income distribution. The paper uses the inequality measures that
    represent the whole income distribution. The distributive effect of monetary
    policy is evaluated in the cases of different frequency data. To identify a
    monetary policy shock, the paper applies the contemporaneous and the long run
    identification methods. In particular, a cointegration relation is determined
    among the considered variables and the vector error correction methodology is
    used for the identification. The obtained results indicate that contractionary
    monetary policy decreases income inequality. These results can have important
    implications for the design of policies to reduce income inequality by giving
    more weight to monetary policy.


  • Statistics


  • income inequality; monetary policy; cointegration; identification