Olivier Coibion, Yuriy Gorodnichenko, Lorenz Kueng, John Silvia, 25 October 2014

There are several conflicting channels through which monetary policy could affect the distribution of wealth, income, and consumption. This column argues that contractionary monetary policy raised inequality in the US, while expansionary monetary policy lowered it. This evidence stresses the need for monetary policy models that take into account heterogeneity across households. Current monetary policy models may significantly understate the welfare costs of zero-bound episodes.   

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