Work

Inequality and transmission channels of monetary policy in a macro agent-based model

Year: 2025

Type: article

Abstract: This study examines the impact of monetary policy on income and wealth inequality through several transmission channels, including income composition, earnings heterogeneity, saving redistribution, portfolio composition, and household debt. Using an agent-based stock-flow-consistent model, the study finds that a permanent increase in the policy rate raises unemployment and reduces firm dividends, hitting net debtors harder than net savers and worsening income inequality. In addition, the savings redistribution channel contributes to the increase in the income of net savers. Furthermore, the study shows that a higher policy rate also leads to lower asset values accumulation, especially for the poorest households, thereby exacerbating wealth inequality through the portfolio composition channel.

Source: Economic Modelling

DOI: 10.1016/j.econmod.2025.107316

Authors: Samantha Coccia, Alberto Russo

Institutions: Marche Polytechnic University, Universitat Jaume I

Language: English

Topic: Economic Theory and Policy

Subfield: General Economics, Econometrics and Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Reduced inequalities, No poverty

Open Access status: hybrid

Estimated APC paid: $3,660