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Monetary Policy, Inequality and Political Instability

Author

Listed:
  • Pablo Duarte
  • Gunther Schnabl
Abstract
Based on the concepts of justice by Hayek, Rawls and Buchanan we argue that the growing political dissatisfaction in industrialized countries is rooted in the asymmetric pattern in monetary policies since the 1980s for two reasons. First, the structurally declining interest rates and the unconventional monetary policy measures have granted privileges to specific groups. Second, the increasingly expansionary monetary policies have negative growth effects, which reduce the scope for compensation of the ones excluded from the privileges. The result is the fading acceptance of the economic order and growing political instability.

Suggested Citation

  • Pablo Duarte & Gunther Schnabl, 2017. "Monetary Policy, Inequality and Political Instability," CESifo Working Paper Series 6734, CESifo.
    • Handle: RePEc:ces:ceswps:_6734
    as

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    References listed on IDEAS

    as
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    8. Andreas Hoffmann & Gunther Schnabl, 2011. "A Vicious Cycle of Manias, Crises and Asymmetric Policy Responses – An Overinvestment View," The World Economy, Wiley Blackwell, vol. 34(3), pages 382-403, March.
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    11. Bryan Caplan, 2001. "Rational Ignorance versus Rational Irrationality," Kyklos, Wiley Blackwell, vol. 54(1), pages 3-26, February.
    12. Juliane Gerstenberger & Gunther Schnabl, 2017. "The Impact of Japanese Monetary Policy Crisis Management on the Japanese Banking Sector," CESifo Working Paper Series 6440, CESifo.
    13. János Kornai, 1993. "The Evolution of Financial Discipline under the Postsocialist System," Kyklos, Wiley Blackwell, vol. 46(3), pages 315-336, August.
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    17. Gunther Schnabl, 2015. "Monetary Policy and Structural Decline: Lessons from Japan for the European Crisis," Asian Economic Papers, MIT Press, vol. 14(1), pages 124-150, Winter/Sp.
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    Citations

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    Cited by:

    1. Jürgen Michels & Gunther Schnabl & Helmut Schleweis & Dominik Löber & Michael Menhart & Ansgar Belke & Daniel Gros, 2019. "Gewinner und Verlierer in der Welt dauerhafter Niedrigzinsen," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 72(20), pages 03-23, October.
    2. Michael Patrick Curran & Matthew J. Fagerstrom, 2019. "Monetary Growth and Financial Sector Wages," Villanova School of Business Department of Economics and Statistics Working Paper Series 41, Villanova School of Business Department of Economics and Statistics.
    3. Karl‐Friedrich Israel & Gunther Schnabl, 2024. "Alternative measures of price inflation and the perception of real income in Germany," The World Economy, Wiley Blackwell, vol. 47(2), pages 618-636, February.
    4. Demary, Markus & Niehues, Judith & Stockhausen, Maximilian & Zdrzalek, Jonas, 2021. "Der Einfluss der EZB-Geldpolitik auf die Vermögensverteilung in Deutschland," Studien, Stiftung Familienunternehmen / Foundation for Family Businesses, number 250019.
    5. Ayşe ATILGAN-YAŞA & Selim ŞANLISOY & Ahmet ÖZEN, 2020. "The Relationship Between Political Instability and Budget Consistency: 1984- 2018 Period Analysis in Turkey," Sosyoekonomi Journal, Sosyoekonomi Society, issue 28(44).
    6. Karl‐Friedrich Israel, 2021. "The fiat money illusion: On the cost‐efficiency of modern central banking," The World Economy, Wiley Blackwell, vol. 44(6), pages 1701-1719, June.
    7. Karl-Friedrich Israel & Tim Florian Sepp & Nils Sonnenberg, 2022. "Japanese monetary policy and household saving," Applied Economics, Taylor & Francis Journals, vol. 54(21), pages 2373-2389, May.
    8. Thomas Mayer & Gunther Schnabl, 2019. "Reasons for the Demise of Interest: Savings Glut and Secular Stagnation or Central Bank Policy?," CESifo Working Paper Series 7954, CESifo.
    9. Karl-Friedrich Israel & Sophia Latsos, 2020. "The impact of (un)conventional expansionary monetary policy on income inequality – lessons from Japan," Applied Economics, Taylor & Francis Journals, vol. 52(40), pages 4403-4420, August.
    10. Andreas Hoffmann & Gunther Schnabl, 2018. "Warum der frühe Ausstieg aus der finanziellen Repression lohnt [Why an Early Exit from Financial Repression is Worthwhile]," Wirtschaftsdienst, Springer;ZBW - Leibniz Information Centre for Economics, vol. 98(7), pages 498-503, July.

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    More about this item

    Keywords

    Hayek; Rawls; Buchanan; privileges; inequality; monetary policy; order of rules; difference principle; economic order;
    All these keywords.

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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