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The effect of monetary policy on inflation heterogeneity along the income distribution

Author

Listed:
  • Miguel Ampudia
  • Michael Ehrmann
  • Georg Strasser
Abstract
This paper studies the effect of monetary policy on inflation along the income distribution in several euro area countries. It shows that monetary policy has differential effects and identifies two channels which point in opposite directions. On the one hand, different consumption shares imply that inflation by high-income households responds less to monetary policy. On the other hand, the paper provides novel evidence that there are substantial differences in shopping behaviour and its reaction to monetary policy, which imply that inflation by high-income households responds more to monetary policy.

Suggested Citation

  • Miguel Ampudia & Michael Ehrmann & Georg Strasser, 2023. "The effect of monetary policy on inflation heterogeneity along the income distribution," BIS Working Papers 1124, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1124
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    References listed on IDEAS

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    Cited by:

    1. Kiss, Regina & Strasser, Georg, 2024. "Inflation heterogeneity across households," Working Paper Series 2898, European Central Bank.

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    More about this item

    Keywords

    inflation; distributional effects; monetary policy; shopping behaviour; substitution;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • D30 - Microeconomics - - Distribution - - - General

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