Should Inequality Factor into Central Banks' Decisions?

By Niels-Jakob H Hansen, Alessandro Lin, Rui Mano

September 25, 2020

Preview Citation

Format: Chicago

Niels-Jakob H Hansen, Alessandro Lin, and Rui Mano. Should Inequality Factor into Central Banks' Decisions?, (USA: International Monetary Fund, 2020) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

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

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2020/196
Stock No:

WPIEA2020196
ISBN:

9781513557649
ISSN:

1018-5941

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