In most countries, recurrent crisis episodes due to financial disorder, the pandemic, and the recent war have increased income and wealth inequality. Moreover, since the 2008 crisis, major central banks have adopted highly expansionary conventional and unconventional monetary policies. Thus, attention to the connection between monetary policy and inequality is surging. However, first, there is no consensus in the empirical literature on the impact of monetary policy shocks on inequality. Second, the literature is mainly focused on the effects of monetary policy on personal rather than functional income distribution. Third, the conventional hypothesis is for monetary policy to have at most an impact over the cycle but not in the long run. Therefore, our work grounds on three objectives. First, we tackle the role of monetary policy in shaping functional income distribution by looking at the long-run behavior of real wages and the labor share of income. Second, we employ for the first time a panel SVAR methodology to a new panel dataset of 15 advanced economies during the 1970-2019 period. Third, differently from extant literature, we pose special attention to the so-called ‘cost’ and ‘labor market’ channels of monetary policy. According to our results, a contractionary monetary policy shock generates long-run adverse effects on the level of real wages. While the labor share initially rises because of the fall in GDP, the subsequent pronounced fall in real wages lets the labor share fall back to the pre-shock level.

Data: 29 gennaio 2024 - 12.00 – 13.30

Autori ed istituzioni: 

Di Bucchianico, University of Salerno, Department of Economics and Statistics

Antonino Lofaro, Roma Tre University, Department of Economics