Monetary Policy and the Redistribution Channel

Adrien Auclert

NBER Working Paper No. 23451
Issued in May 2017
NBER Program(s):Economic Fluctuations and Growth, Monetary Economics

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.

Supplementary materials for this paper:

• online appendix

Acknowledgments

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Document Object Identifier (DOI): 10.3386/w23451

Published: Adrien Auclert, 2019. "Monetary Policy and the Redistribution Channel," American Economic Review, vol 109(6), pages 2333-2367. citation courtesy of