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Inequality aversion and the long-run effectiveness of monetary policy: Bilateral versus group comparison

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  • Ahrens, Steffen

Abstract

In this paper we incorporate the two most prominent approaches of inequality aversion, i.e. Fehr and Schmidt (1999) and Bolton and Ockenfels (2000) into an otherwise standard New Keynesian macro model and compare them with respect to their influence on the long-run effectiveness of monetary policy. We find that the choice for Fehr and Schmidt or Bolton and Ockenfels like preferences is of importance only for the quantitative - but not the qualitative - effectiveness of monetary policy in the long-run.

Suggested Citation

  • Ahrens, Steffen, 2012. "Inequality aversion and the long-run effectiveness of monetary policy: Bilateral versus group comparison," Kiel Working Papers 1802, Kiel Institute for the World Economy (IfW Kiel).
    • Handle: RePEc:zbw:ifwkwp:1802
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    price stickiness; long-run Phillips curve; inequality aversion;
    All these keywords.

    JEL classification:

    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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