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Monetary Policy and Racial Inequality

Author

Listed:
  • Alina K. Bartscher

    (Danmarks Nationalbank)

  • Moritz Kuhn

    (University of Bonn)

  • Moritz Schularick

    (University of Bonn)

  • Paul Wachtel

    (New York University Stern School of Business)

Abstract

This paper aims at an improved understanding of the relationship between monetary policy and racial inequality. We investigate the distributional effects of monetary policy in a unified framework, linking monetary policy shocks both to earnings and wealth differentials between Black and white households. Specifically, we show that, although an accommodative monetary policy shock increases employment for Black households more than for white households, the overall effects on earnings are small. At the same time, an accommodative monetary policy shock has large effects on the wealth difference between Black and white households, because Black households own fewer assets that appreciate in value. This suggests an important trade-off if policymakers aim to reduce racial inequalities.

Suggested Citation

  • Alina K. Bartscher & Moritz Kuhn & Moritz Schularick & Paul Wachtel, 2022. "Monetary Policy and Racial Inequality," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 53(1 (Spring), pages 1-63.
    • Handle: RePEc:bin:bpeajo:v:53:y:2022:i:2022-01:p:1-63
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    File URL: https://www.brookings.edu/articles/monetary-policy-and-racial-inequality/
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    Citations

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    Cited by:

    1. Marjan Petreski & Stefan Tanevski & Alejandro D. Jacobo, 2024. "Monetary Policy and the Gendered Labor Market Dynamics: Evidence from Developing Economies," Papers 2402.05729, arXiv.org.
    2. Kuhn, Florian & Chanci, Luis, 2024. "Racial disparities in labor outcomes: The effects of hiring discrimination over the business cycle," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 801-817.
    3. Albert, Juan-Francisco & Gómez-Fernández, Nerea, 2024. "The impact of monetary policy shocks on net worth and consumption across races in the United States," Economic Systems, Elsevier, vol. 48(1).

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