Working Paper: NBER ID: w23451
Authors: Adrien Auclert
Abstract: 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.
Keywords: Monetary Policy; Redistribution; Consumption; Marginal Propensity to Consume
JEL Codes: D31; D52; E21; E52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| monetary expansions (E59) | real incomes (E25) |
| monetary expansions (E59) | inflation (E31) |
| monetary expansions (E59) | real interest rates (E43) |
| real incomes (E25) | consumption (E21) |
| inflation (E31) | consumption (E21) |
| real interest rates (E43) | consumption (E21) |
| earnings heterogeneity channel (J31) | consumption (E21) |
| Fisher channel (C58) | consumption (E21) |
| interest rate exposure channel (E43) | consumption (E21) |
| debtors (F34) | consumption (E21) |
| creditors (F34) | consumption (E21) |