Working Paper: CEPR ID: DP18460
Authors: Miguel Ampudia; Michael Ehrmann; Georg Strasser
Abstract: This paper studies the effect of monetary policy on inflation along the income distribution in several euro area countries. It shows that monetary policy has differential effects and identifies two channels which point in opposite directions. On the one hand, different consumption shares imply that the inflation experienced by high-income households responds less to monetary policy. On the other hand, the paper provides novel evidence that there are substantial differences in shopping behaviour and its reaction to monetary policy, which imply that the inflation experienced by high-income households responds more to monetary policy.
Keywords: inflation; distributional effects; monetary policy; shopping behaviour; substitution
JEL Codes: E31; E52; D30
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| monetary policy shocks (E39) | inflation response (E31) |
| high-income households (R20) | inflation response (E31) |
| shopping behavior (D19) | inflation response (E31) |
| monetary policy (E52) | inflation response across income distribution (E25) |