The distributive effects of conventional and unconventional monetary policies

Abstract

The paper evaluates the distributional effects of conventional and unconventional monetary policies for the USA. The distributional effects are evaluated for the overall impact on the income distribution, using Gini index. The paper also assesses the effects of conventional and unconventional monetary policies on the different parts of income distribution, employing corresponding percentile ratios. The obtained results show that contractionary conventional monetary policy reduces income inequality while expansionary unconventional monetary policy raises it. In particular, the results indicate that the distributional impact of conventional monetary policy is stronger. Nevertheless, its impact on the lower part of income distribution is not significant while unconventional monetary policy has a significant effect on it. In addition, the variance decomposition analysis reveals that unconventional monetary policy explains the higher share of the variation in Gini index of income inequality.