Department of Economics
579 Serra Mall
Stanford, CA 94305-6072
NBER Program Affiliations:
NBER Affiliation: Faculty Research Fellow
NBER Working Papers and Publications
|May 2017||Monetary Policy and the Redistribution Channel|
This paper evaluates the role of redistribution in the transmission mechanism of monetary policy to consumption. Three channels affect aggregate spending when winners and losers have different marginal propensities to consume: an earnings heterogeneity channel from unequal income gains, a Fisher channel from unexpected inflation, and an interest rate exposure channel from real interest rate changes. Sufficient statistics from Italian and U.S. data suggest that all three channels are likely to amplify the effects of monetary policy. A standard incomplete markets model can deliver the empirical magnitudes if assets have plausibly high durations but a counterfactual degree of inflation indexation.