Artikel
MONETARY POLICY, FINANCIAL CONSTRAINTS, AND REDISTRIBUTION
This article examines how financial constraints affect redistribution via monetary policy. We explore a novel mechanism of monetary nonneutrality, which is based on debt limits imposed in nominal terms. Specifically, when debt is constrained by current income, monetary policy can alter the real terms of borrowing. Changes in inflation exert ambiguous effects, depending on the initial debt/wealth position and the willingness to borrow. We show analytically that borrowers can benefit from increased debt limits under lower inflation rates. This novel effect can dominate conventional debt deflation effects. We find that particularly less indebted borrowers as well as potential future borrowers gain and that aggregate welfare can be enhanced under a permanent reduction in inflation.
- Language
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Englisch
- Bibliographic citation
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Journal: International Economic Review ; ISSN: 1468-2354 ; Volume: 61 ; Year: 2020 ; Issue: 4 ; Pages: 1501-1529 ; Hoboken, NJ: Wiley
- Classification
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Wirtschaft
- Event
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Geistige Schöpfung
- (who)
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Loenser, Christian
Schabert, Andreas
- Event
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Veröffentlichung
- (who)
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Wiley
- (where)
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Hoboken, NJ
- (when)
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2020
- DOI
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doi:10.1111/iere.12468
- Handle
- Last update
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10.03.2025, 11:45 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Loenser, Christian
- Schabert, Andreas
- Wiley
Time of origin
- 2020
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