Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/248304
Year of Publication: 
2021
Series/Report no.: 
Working Paper No. 1/2021
Publisher: 
National Bank of the Republic of North Macedonia, Skopje
Abstract: 
In this paper, we investigate the effects of monetary policy concerning the inflation rates specific for each income group of households. We find that the prices specific for high-income households are generally more rigid and less volatile compared to the prices specific for middle and lower-income households. This means that monetary policy can differently affect the different inflation rates specific for each of the income groups. By using a Factor-Augmented VAR (FAVAR) model, we show that a monetary policy shock affects high-income households less compared to middle and lower-income households, although the differences between the separate income groups are generally small. Then, by using a small scale gap model, we find that the prices of low-income households are the most sensitive to a monetary policy shock, while the prices of the top-income households are the least sensitive to the shock, which is in line with our empirical findings.
Subjects: 
Inflation
monetary policy
distributional effects
JEL: 
E31
E52
Document Type: 
Working Paper

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