Doves for the rich, hawks for the poor? Distributional consequences of systematic monetary policy

Arbeitspapier

We build a New Keynesian business-cycle model with rich household heterogeneity. In the model, systematic monetary stabilization policy affects the distribution of income, income risks, and the demand for funds and supply of assets: the demand, because matching frictions render idiosyncratic labor-market risk endogenous; the supply, because markups, adjustment costs, and the tax system mean that the average profitability of firms is endogenous. Disagreement about systematic monetary stabilization policy is pronounced. The wealth rich or retired tend to favor inflation targeting. The wealth-poor working class, instead, favors unemployment-centric policy. One- and two-agent alternatives can show unanimous disapproval of inflation-centric policy, instead. We highlight how the political support for inflation-centric policy depends on wage setting, the tax system, and the portfolio that households have.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECONtribute Discussion Paper ; No. 089

Classification and Topics

• Classification: Wirtschaft ; General Aggregative Models: Keynes; Keynesian; Post-Keynesian ; Macroeconomics: Consumption; Saving; Wealth ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Business Fluctuations; Cycles ; Monetary Policy ; Unemployment: Models, Duration, Incidence, and Job Search
• Subject: Monetary Policy ; Unemployment ; Search and Matching ; Heterogeneous Agents ; General Equilibrium ; Dual Mandate

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gornemann, Nils ; Küster, Keith ; Nakajima, Makoto
• Event: Veröffentlichung
• (who): University of Bonn and University of Cologne, Reinhard Selten Institute (RSI)
• (where): Bonn and Cologne
• (when): 2021

Further information

• Handle: http://hdl.handle.net/10419/237334
• Last update: 10.03.2025, 11:44 AM CET