Should Inequality Factor into Central Banks' Decisions?

Should Inequality Factor into Central Banks' Decisions?
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Volume/Issue: Volume 2020 Issue 196
Publication date: September 2020
ISBN: 9781513557649
$18.00
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Topics covered in this book

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Inflation , Economics- Macroeconomics , WP , consumption inequality , inequality gap , inflation gap , optimal monetary policy , labor income

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.