Abstract We study the distributional and welfare implications of U.S. monetary policy shocks in a small open economy under the classic rules of an exchange rate peg and inflation targeting. In a model with heterogenous agents, we show that contractionary (expansionary) monetary policy shocks in...

The empirical evidence on how monetary policy affects inequality is mixed. We propose a model with endogenously segmented financial markets which can reconcile this contrasting em- pirical evidence. In addition to the conventional income composition channel (intensive margin), monetary policy in...