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

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  • Martin Feldkircher
  • Kazuhiko Kakamu

Abstract

We examine the effects of monetary policy on income inequality in Japan using a novel econometric approach that jointly estimates the Gini coefficient based on micro-level grouped data of households and the dynamics of macroeconomic quantities. Our results indicate different effects on income inequality for different types of households: A monetary tightening increases inequality when income data is based on households whose head is employed (workers' households), while the effect reverses over the medium term when considering a broader definition of households. Differences in the relative strength of the transmission channels can account for this finding. Finally we demonstrate that the proposed joint estimation strategy leads to more informative inference while results based on the frequently used two-step estimation approach yields inconclusive results.

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  • Martin Feldkircher & Kazuhiko Kakamu, 2018. "How does monetary policy affect income inequality in Japan? Evidence from grouped data," Papers 1803.08868, arXiv.org, revised Jul 2021.
    • Handle: RePEc:arx:papers:1803.08868
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    2. 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.
    3. Jérôme Creel & Mehdi El Herradi, 2019. "Shocking aspects of monetary policy on income inequality in the euro area," Documents de Travail de l'OFCE 2019-15, Observatoire Francais des Conjonctures Economiques (OFCE).
    4. Karl-Friedrich Israel & Tim Florian Sepp & Nils Sonnenberg, 2023. "The Effects of Unconventional Monetary Policy on Stock Markets and Household Incomes in Japan," Post-Print halshs-04024219, HAL.
    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. repec:spo:wpmain:info:hdl:2441/2okfbeuvhi9g2pirgpimtke7pn is not listed on IDEAS
    7. repec:spo:wpmain:info:hdl:2441/5srl83htc08lnqmtptsrb72rt9 is not listed on IDEAS
    8. 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.
    9. 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.
    10. 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.
    11. repec:hal:spmain:info:hdl:2441/2okfbeuvhi9g2pirgpimtke7pn is not listed on IDEAS
    12. Merrino, Serena, 2022. "Monetary policy and wage inequality in South Africa," Emerging Markets Review, Elsevier, vol. 53(C).
    13. 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).
    14. repec:hal:spmain:info:hdl:2441/5srl83htc08lnqmtptsrb72rt9 is not listed on IDEAS
    15. Serena Merrino, 2021. "Wage inequality under inflationtargeting in South Africa," Working Papers 11018, South African Reserve Bank.
    16. 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.

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    More about this item

    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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