Should Inequality Factor into Central Banks' Decisions?
September 25, 2020
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Summary
Inequality is increasingly a concern. Fiscal and structural policies are well-understood mitigators. However, less is known about the potential role of monetary policy. This paper investigates how inequality matters for monetary policy within a tractable Two-Agent New Keynesian model that captures important dimensions of inequality. We find some support for making inequality an explicit target for monetary policy, particularly if central banks follow standard Taylor rules.
Subject: Consumption, Income, Income inequality, Inflation, Output gap
Keywords: consumption inequality, inequality gap, inflation gap, labor income, optimal monetary policy, WP
Pages:
39
Volume:
2020
DOI:
Issue:
196
Series:
Working Paper No. 2020/196
Stock No:
WPIEA2020196
ISBN:
9781513557649
ISSN:
1018-5941
