Should Inequality Factor into Central Banks' Decisions?

Author/Editor:

Niels-Jakob H Hansen ; Alessandro Lin ; Rui Mano

Publication Date:

September 25, 2020

Electronic Access:

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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.

Series:

Working Paper No. 2020/196

Subject:

Frequency:

regular

English

Publication Date:

September 25, 2020

ISBN/ISSN:

9781513557649/1018-5941

Stock No:

WPIEA2020196

Pages:

39

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