Monetary Policy with Racial Inequality
Abstract: I develop a heterogeneous-agent New-Keynesian model featuring racial inequality in income and wealth, and studies interactions between racial inequality and monetary policy. Black and Hispanic workers gain more from accommodative monetary policy than White workers mainly due to higher labor market risks. Their gains are larger also because of a larger proportion of them are hand-to-mouth, while wealthy White workers gain more from asset price appreciation. Monetary and fiscal policies are substitutes in providing insurance against cyclical labor market risks. Racial minorities gain even more from an accommodative monetary policy in the absence of income-dependent fiscal transfers.
File(s): File format is application/pdf https://www.minneapolisfed.org/institute/working-papers-institute/iwp70.pdf
Provider: Federal Reserve Bank of Minneapolis
Part of Series: Opportunity and Inclusive Growth Institute Working Papers
Publication Date: 2023-04-19