Doves for the Rich, Hawks for the Poor? Distributional Consequences of Monetary Policy

By Nils Gornemann, Keith Kuester, M. Nakajima. 2016

217 citations recorded by the source corpus.

We build a New Keynesian business-cycle model with rich household heterogeneity. A central feature is that matching frictions render labor-market risk countercyclical and endogenous to monetary policy. Our main result is that a majority of households prefer substantial stabilization of unemployment even if this means deviations from price stability. A monetary policy focused on unemployment stabilization helps "Main Street" by providing consumption insurance. It hurts "Wall Street" by reducing precautionary saving and, thus, asset prices. On the aggregate level, household heterogeneity changes the trans mission of monetary policy to consumption, but hardly to GDP. Central to this result is allowing for self-insurance and aggregate investment.

Subfields: Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/e1f9c93d7c31eba64e8d259a03472a2427766a2c

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Economics and Econometrics

1. J. Gaĺı
2. Klaus Adam
3. Davide Debortoli
4. Ulrich Volz
5. Junyi Zhu
6. Cars H. Hommes
7. C. Walsh
8. Guido Lorenzoni

In Finance

1. Simon Dikau
2. Klaus Adam
3. Davide Debortoli
4. J. Gaĺı
5. Ulrich Volz
6. C. Walsh
7. Cars H. Hommes

Citations in the corpus

• Price Level Changes and the Redistribution of Nominal Wealth Across the Euro Area (2014, background): “The shortfall occurs for a number of reasons, discussed in Kavonius and Törmälehto (2010), Honkkila and Kavonius (2012) and HFCN (2013b), one of which is that the HH sector in the EAA comprises non-profit institutions, e.”
• Central bank mandates, sustainability objectives and the promotion of green finance (2019, background): “A controversial discussion has emerged on the distributional consequences of the negative interest and quantitative easing policies adopted by major central banks (e.g. Gornemann et al., 2016, Coibion et al., 2017, Colciago et al., 2019).”
• CENTRAL BANK POLICIES AND INCOME AND WEALTH INEQUALITY: A SURVEY (2019, unknown): “11 Gornemann et al. (2016) augment the HANK framework with search-and-matching frictions.”
• Microeconomic Heterogeneity and Macroeconomic Shocks (2018, unknown): “Gornemann et al. (2016) argue that a monetary policy rule that emphasizes price stability redistributes towards rich households, while one that stresses output stability redistributes towards poor households who are more exposed to unemployment risk, and that the median household prefers output stab”
• On DSGE Models (2018, unknown): “9 Important earlier papers in this literature include Oh and Reis (2012), Guerrieri and Lorenzoni (2017), McKay and Reis (2016), Gornemann et al. (2016) and Auclert (2017). 10 The Tealbooks are available with a five year lag at https://www.”
• Monetary Policy with Heterogeneous Agents : Insights from TANK models ∗ (2018, methodology): “Some examples are the works of McKay et al. (2016), Gornemann et al.”
• Monetary Policy According to HANK (2018, unknown): “Additionally, the focus of our paper differs from that of earlier papers studying monetary policy in the presence of incomplete markets (Gornemann et al., 2014; Auclert, 2014; McKay et al., 2015) in that we inspect the transmission mechanism”
• Monetary Policy and Heterogeneity: An Analytical Framework (2018, unknown): “…and Lorenzoni, 2017); job-uncertainty-driven recessions (Ravn and Sterk, 2017; den Haan, Rendahl, and Riegler, 2018); monetary policy transmission (Gornemann, Kuester, and Nakajima, 2016; Auclert, 2016; Debortoli and Gali, 2017); inequality and aggregate demand (Auclert and Ronglie, 2017);…”
• The New Keynesian cross (2020, unknown): “…2017); job-uncertaintydriven recessions (Ravn and Sterk, 2017; den Haan, Rendahl, and Riegler, 2018); monetary policy transmission (KMV, 2018; Gornemann, Kuester, and Nakajima, 2016; Auclert, 2016); forward guidance (MNS, 2016); scal multipliers (Hagedorn, Manovskii, and Mitman, 2018); and…”
• The State of New Keynesian Economics: A Partial Assessment (2018, background): “(2017), Ravn and Sterk (2017), Gornemann et al. (2016), Farhi and Werning (2016), Werning (2015) and Galí and Debortoli (2017), among many others.”