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How does monetary policy affect income inequality in Japan? Evidence from grouped data

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  • Martin Feldkircher

    (Vienna School of International Studies (DA)
    Oesterreichische Nationalbank (OeNB))

  • Kazuhiko Kakamu

    (Nagoya City University)

Abstract

We examine the effects of monetary policy on income inequality in Japan. For that purpose, we use a novel Bayesian approach that jointly estimates the Gini coefficient from grouped income data and the dynamics of macroeconomic quantities. Our results indicate different effects on income inequality for different types of households: A monetary tightening decreases inequality when we consider a broad definition of household data that also includes the unemployed and retirees. Higher unemployment and tighter borrowing conditions make the richer (i.e., employed) comparably worse off. The result reverses, if we focus on the subsample of households whose head is employed. Through the same channels, inequality increases if monetary policy is tightened. A counterfactual analysis reveals that indeed the financial channel and the job destruction channel are the most important transmission mechanisms.

Suggested Citation

  • Martin Feldkircher & Kazuhiko Kakamu, 2022. "How does monetary policy affect income inequality in Japan? Evidence from grouped data," Empirical Economics, Springer, vol. 62(5), pages 2307-2327, May.
    • Handle: RePEc:spr:empeco:v:62:y:2022:i:5:d:10.1007_s00181-021-02102-7
    DOI: 10.1007/s00181-021-02102-7
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    Cited by:

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    3. Tavares Garcia, Francisco & Cross, Jamie L., 2024. "The impact of monetary policy on income inequality: Does inflation targeting matter?," Finance Research Letters, Elsevier, vol. 61(C).
    4. Jérôme Creel & Mehdi El Herradi, 2024. "Income inequality and monetary policy in the euro area," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(1), pages 332-355, January.
    5. Makmun Syadullah & Benny Gunawan Adriansyah & Tri Wibowo, 2019. "Impact of Economic and Non-Economic Factors on Income Inequality in ASEAN Countries," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 9(12), pages 1346-1357, December.
    6. Johnson Worlanyo Ahiadorme, 2022. "Monetary policy transmission and income inequality in Sub-Saharan Africa," Economic Change and Restructuring, Springer, vol. 55(3), pages 1555-1585, August.
    7. repec:hal:spmain:info:hdl:2441/5srl83htc08lnqmtptsrb72rt9 is not listed on IDEAS
    8. Serena Merrino, 2021. "Wage inequality under inflationtargeting in South Africa," Working Papers 11018, South African Reserve Bank.
    9. Czeczeli, Vivien, 2021. "A monetáris politika hatása a jövedelmi egyenlőtlenségekre [Monetary-policy effects on income inequalities]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(3), pages 282-299.
    10. Israel, Karl-Friedrich & Sepp, Tim Florian & Sonnenberg, Nils, 2023. "The effects of unconventional monetary policy on stock markets and household incomes in Japan," Working Papers 177, University of Leipzig, Faculty of Economics and Management Science.
    11. Jérôme Creel & Mehdi El Herradi, 2019. "Shocking aspects of monetary policy on income inequality in the euro area," Working Papers hal-03403233, HAL.
    12. repec:spo:wpmain:info:hdl:2441/2okfbeuvhi9g2pirgpimtke7pn is not listed on IDEAS
    13. Apanisile, Olumuyiwa Tolulope, 2021. "Monetary Policy Shocks and Income Inequality in Nigeria: Do Effects of Anticipated and Unanticipated Shocks Differ?," African Journal of Economic Review, African Journal of Economic Review, vol. 9(2), April.
    14. Merrino, Serena, 2022. "Monetary policy and wage inequality in South Africa," Emerging Markets Review, Elsevier, vol. 53(C).
    15. Sima Siami Namini, 2022. "Quantitative Easing Policy and Income Inequality in the U.S. Economy: Evidence from a FAVAR Model," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 20(4), pages 759-779, December.
    16. repec:hal:spmain:info:hdl:2441/2okfbeuvhi9g2pirgpimtke7pn is not listed on IDEAS

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    More about this item

    Keywords

    Income inequality; Monetary policy; Grouped data; Bayesian analysis;
    All these keywords.

    JEL classification:

    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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