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Domestic and External Monetary Policy Shocks and Economic Inequality in the Republic of Korea

Author

Listed:
  • Hahm, Joon-Ho

    (Yonsei University)

  • Lee, Dong Jin

    (Sangmyung University)

  • Park, Cyn-Young

    (Asian Development Bank)

Abstract

This paper investigates the effects of monetary policy shocks on income and wealth inequalities in the Republic of Korea. Using the detailed Household Income and Expenditure Survey and Korean Labor and Income Panel Study data, we construct measures of income and wealth inequality for the Korean economy. Empirical results show that both domestic and external monetary policy shocks exert significant countercyclical effects on income inequality. For wealth inequality, however, the effects are very different. Whereas domestic monetary policy shocks are insignificant, external policy shocks proxied by fluctuations in net capital flows seem to have significant effects on net wealth inequality.

Suggested Citation

  • Hahm, Joon-Ho & Lee, Dong Jin & Park, Cyn-Young, 2022. "Domestic and External Monetary Policy Shocks and Economic Inequality in the Republic of Korea," ADB Economics Working Paper Series 654, Asian Development Bank.
    • Handle: RePEc:ris:adbewp:0654
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    References listed on IDEAS

    as
    1. Uhlig, Harald, 2005. "What are the effects of monetary policy on output? Results from an agnostic identification procedure," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 381-419, March.
    2. Mumtaz, Haroon & Theophilopoulou, Angeliki, 2017. "The impact of monetary policy on inequality in the UK. An empirical analysis," European Economic Review, Elsevier, vol. 98(C), pages 410-423.
    3. Rory O'Farrell & Lukasz Rawdanowicz, 2017. "Monetary policy and inequality: Financial channels," International Finance, Wiley Blackwell, vol. 20(2), pages 174-188, June.
    4. Jonathan Heathcote & Fabrizio Perri & Giovanni L. Violante, 2010. "Unequal We Stand: An Empirical Analysis of Economic Inequality in the United States: 1967-2006," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(1), pages 15-51, January.
    5. Yoon, Deok Ryong & Rhee, Dong-Eun & Lee, Jinhee, 2019. "자산가격 변화가 경제적 불평등과 대외경제 변수에 미치는 영향 분석(Analysis of the Effects of Asset Price Changes on Economic Inequality and External Economic Variables)," Policy Analyses 19-21, Korea Institute for International Economic Policy.
    6. Emmanuel Saez & Gabriel Zucman, 2014. "Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data," NBER Working Papers 20625, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    monetary policy; income inequality; wealth inequality; external monetary policy shock; emerging market economies;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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