Monetary policy and inequality : a two-way relation

Luzie Thiel

We study the transmission of monetary policy in the presence of heterogeneous households and examine the implications when the share of constrained households is a function of monetary policy. We build an analytically tractable heterogeneous agent New Keynesian model (THANK) with an endogenous share of hand-to-mouth households. The transmission of monetary policy on aggregate demand is amplified in this setup by inequality between saver and hand-to-mouth households. The amplification effect depends on monopolistic rents (enhancing) and redistribution (mitigating). Unlike most THANK models, we refrain from the assumption of a full insurance steady state.

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Year of publication:	[2023]
Authors:	Thiel, Luzie
Publisher:	Marburg : Philipps-University Marburg, School of Business and Economics
Subject:	Monetary Policy \| Heterogeneous Households \| Inequality \| Aggregate Demand \| Complementarity \| Financial Conditions \| Imperfect Insurance \| Geldpolitik \| Monetary policy \| Theorie \| Theory \| Einkommensverteilung \| Income distribution \| Gesamtwirtschaftliche Nachfrage \| Aggregate demand \| Privater Konsum \| Private consumption \| Schätzung \| Estimation \| Unvollkommener Markt \| Incomplete market \| Schock \| Shock