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29 april 2019 Onderzoek


  • Mehdi El Herradi
  • Aurélien Leroy

This paper examines the distributional implications of monetary pol-icy from a long-run perspective with data spanning a century of modern economic history in 12 advanced economies between 1920 and 2015. We employ two complementary empirical methodologies for estimating the dynamic responses of the top 1% income share to a monetary policy shock: vector auto-regressions and local projections. We notably exploit the implications of the macroeconomic policy trilemma to identify exogenous variations in monetary conditions. The obtained results indicate that ex-pansionary monetary policy strongly increases the share of national income held by the top one percent. Our findings also suggest that this eï¬ect is arguably driven by higher asset prices, and holds irrespective of the state of the economy.

: Monetary policy, Income inequality, Local projections, Panel VAR.
JEL classifications: D63, E62, E64.


Working paper no. 632

632 - Monetary policy and the top one percent: Evidence from a century of modern economic history