An unfair affair?: inequality spillovers of US monetary policy

Batungbacal, Bernice; Contreras, María Paula; Martínez, Diego

An unfair affair?: inequality spillovers of US monetary policy

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Batungbacal, B, Contreras, M, Martínez, D. An unfair affair?: inequality spillovers of US monetary policy. 2022. handle: http://hdl.handle.net/10230/55229

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Abstract

Amid an extremely financially interconnected economic environment across the globe, coupled with the increasing interest rates post-pandemic, concerns surrounding the indirect and unintended consequences of policy are rising, not just domestically but across national borders as well. This paper examines United States monetary policy spillovers on inequality in a panel of nine Latin American countries using a local projection approach. We find that an unexpected increase in United States' interest rates results in a rise in both income and consumption inequality and that it is able to explain a relevant share of Gini variation. Furthermore, the Income Composition and Marginal Propensity to Consume channels may be playing some role in the transmission of the shock. Lastly, the effects on inequality depend on the kind of monetary policy conducted, revealing an asymmetric property of the shock.

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Treball fi de màster de: Master's Degree in Specialized Economic Analysis: Macroeconomic Policy and Financial Markets. Curs 2021-2022
Tutors: Luca Gambetti, Hugo Rodríguez