Monetary Policy and the Top One Percent: Evidence from a Century of Modern Economic History

40 Pages Posted: 1 May 2019

See all articles by Mehdi El Herradi

Mehdi El Herradi

Aix-Marseille Université, Aix-Marseille School of Economics (AMSE)

Aurélien Leroy

LAREFI, University of Bordeaux

Date Written: April 29, 2019

Abstract

This paper examines the distributional implications of monetary pol-icy from a long-run perspective with data spanning a century of modern economic history in 12 advanced economies between 1920 and 2015. We employ two complementary empirical methodologies for estimating the dynamic responses of the top 1% income share to a monetary policy shock: vector auto-regressions and local projections. We notably exploit the implications of the macroeconomic policy trilemma to identify exogenous variations in monetary conditions. The obtained results indicate that ex-pansionary monetary policy strongly increases the share of national income held by the top one percent. Our findings also suggest that this effect is arguably driven by higher asset prices, and holds irrespective of the state of the economy.

Keywords: Monetary policy, Income inequality, Local projections, Panel VAR

JEL Classification: D63, E62, E64

Suggested Citation

El Herradi, Mehdi and Leroy, Aurélien, Monetary Policy and the Top One Percent: Evidence from a Century of Modern Economic History (April 29, 2019). De Nederlandsche Bank Working Paper No. 632 (2019), Available at SSRN: https://ssrn.com/abstract=3379740 or http://dx.doi.org/10.2139/ssrn.3379740

Mehdi El Herradi (Contact Author)

Aix-Marseille Université, Aix-Marseille School of Economics (AMSE) ( email )

5-9 Boulevard Maurice Bourdet, CS 50498
Marseille, ​13205
France

Aurélien Leroy

LAREFI, University of Bordeaux ( email )

Avenue Léon Duguit
Pessac, Centre 33400
France

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