Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/232474
Authors: 
Bartscher, Alina K.
Kuhn, Moritz
Schularick, Moritz
Wachtel, Paul
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 8877
Abstract: 
This paper aims at an improved understanding of the relationship between monetary policy and racial inequality. We investigate the distributional effects of monetary policy in a unified framework, linking monetary policy shocks both to earnings and wealth differentials between black and white households. Specifically, we show that, although a more accommodative monetary policy increases employment of black households more than white households, the overall effects are small. At the same time, an accommodative monetary policy shock exacerbates the wealth difference between black and white households, because black households own less financial assets that appreciate in value. Over multi-year time horizons, the employment effects are substantially smaller than the countervailing portfolio effects. We conclude that there is little reason to think that accommodative monetary policy plays a significant role in reducing racial inequities in the way often discussed. On the contrary, it may well accentuate inequalities for extended periods.
Subjects: 
monetary policy
racial inequality
income distribution
wealth distribution
wealth effects
JEL: 
E40
E52
J15
Document Type: 
Working Paper

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