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Monetary Policy and Racial Inequality

Author

Listed:
  • Alina K. Bartscher
  • Moritz Kuhn
  • Moritz Schularick
  • Paul Wachtel
Abstract
Racial income and wealth gaps in the United States are large and persistent. Recently, central bankers and politicians have put forward the suggestion that monetary policy can be used to reduce these inequalities. 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. Over multi-year horizons, we find that while accommodative monetary policy tends to reduce racial unemployment and thus earnings differentials, it exacerbates racial wealth differentials, which implies an important tradeoff for policymakers.

Suggested Citation

  • Alina K. Bartscher & Moritz Kuhn & Moritz Schularick & Paul Wachtel, 2021. "Monetary Policy and Racial Inequality," ECONtribute Policy Brief Series 014, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkpbs:014
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    Cited by:

    1. Bennani, Hamza, 2023. "Effect of monetary policy shocks on the racial unemployment rates in the US," Economic Systems, Elsevier, vol. 47(1).
    2. 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).
    3. Kuhn, Moritz & Bartscher, Alina & Schularick, Moritz & Wachtel, Paul, 2021. "Monetary policy and racial inequality," CEPR Discussion Papers 15734, C.E.P.R. Discussion Papers.
    4. Nittai Bergman & Benjamin Born & David A. Matsa & Michael Weber, 2022. "Inclusive Monetary Policy: How Tight Labor Markets Facilitate Broad-Based Employment Growth," NBER Working Papers 29651, National Bureau of Economic Research, Inc.
    5. Edmond Berisha & Ram Sewak Dubey & Eric Olson, 2022. "Monetary policy and the racial wage gap," Empirical Economics, Springer, vol. 63(6), pages 3045-3059, December.
    6. 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.
    7. Gerardi, Kristopher & Willen, Paul S. & Zhang, David Hao, 2023. "Mortgage prepayment, race, and monetary policy," Journal of Financial Economics, Elsevier, vol. 147(3), pages 498-524.
    8. 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.
    9. Dubravko Mihaljek, 2021. "Interactions between fiscal and monetary policies: a brief history of a long relationship," Public Sector Economics, Institute of Public Finance, vol. 45(4), pages 419-432.
    10. Jermaine Toney, 2022. "Is there wealth stability across generations in the U.S.? Evidence from panel study, 1984–2017," Contemporary Economic Policy, Western Economic Association International, vol. 40(4), pages 551-567, October.
    11. Anastasia Burya & Rui Mano & Mr. Yannick Timmer & Miss Anke Weber, 2022. "Monetary Policy Under Labor Market Power," IMF Working Papers 2022/128, International Monetary Fund.
    12. Katya Kartashova & Xiaoqing Zhou, 2021. "Wealth Inequality and Return Heterogeneity During the COVID-19 Pandemic," Working Papers 2114, Federal Reserve Bank of Dallas.
    13. Francesco D’Acunto & Andreas Fuster & Michael Weber, 2021. "Diverse Policy Committees Can Reach Underrepresented Groups," NBER Working Papers 29275, National Bureau of Economic Research, Inc.
    14. Cobus Vermeulen, 2023. "The inherent uncertainties in output gap estimation a South African perspective," Working Papers 11051, South African Reserve Bank.
    15. Fatima Mboup, 2023. "Economic Activity by Race," Working Papers 23-16, Federal Reserve Bank of Philadelphia.

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    More about this item

    JEL classification:

    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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