Interaction between monetary policy and income inequality in a deposits market Report as inadecuate




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Abstract

The paper studies the impact of income inequality on the monetary policy and the feedback, in a partial equilibrium framework. Wealth differences of depositors play crucial role in determining aggregate deposits, available for loans. Non-homothetic structure of depositors- return function makes distribution of deposits relevant for the aggregate. Unequal distribution of resources leadsto a lower deposit price elasticity for the rich relative to the poor, and this results in higher markups and lower level of collected total deposits. Interaction between monetary policy and incomeinequality leads the following results: i higher inequality reduces the power of monetary policy in terms of depositors- responsiveness to the policy changes and ii expansionary contractionary monetary policy increases decreases savings differences.The model provides a new source of financial friction, relevant for economies with high income inequality.



Item Type: MPRA Paper -

Original Title: Interaction between monetary policy and income inequality in a deposits market-

Language: English-

Keywords: Deposit holdings inequality; non-homothetic technologies; monetary policy-

Subjects: D - Microeconomics > D3 - Distribution > D31 - Personal Income, Wealth, and Their DistributionsE - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary PolicyD - Microeconomics > D4 - Market Structure, Pricing, and Design > D43 - Oligopoly and Other Forms of Market ImperfectionG - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages-





Author: Grigoryan, Aleksandr

Source: https://mpra.ub.uni-muenchen.de/43555/







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