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For whom the bill tolls: redistributive consequences of a monetary-fiscal stimulus

Author

Listed:
  • Michał Brzoza-Brzezina
  • Julia Jabłońska
  • Marcin Kolasa
  • Krzysztof Makarski
Abstract
During the COVID-19 pandemic, governments in the euro area sharply increased spending, while the European Central Bank eased financing conditions. We use this episode to assess how such a concerted monetary-fiscal stimulus redistributes welfare between various age cohorts. Our assessment involves not only the income side of household balance sheets (mainly direct effects of transfers), but also the more obscure financing side that, to a substantial degree, occurred via indirect effects (with a prominent role of the inflation tax). Using a quantitative life-cycle model, we document that young households benefited from the stimulus, while the bill was mainly paid by middle-aged and older agents. Crucially, most welfare redistribution was due to indirect effects related to macroeconomic adjustment that resulted from the stimulus. As a consequence, even though all age cohorts received significant transfers, welfare of some actually decreased.

Suggested Citation

  • Michał Brzoza-Brzezina & Julia Jabłońska & Marcin Kolasa & Krzysztof Makarski, 2024. "For whom the bill tolls: redistributive consequences of a monetary-fiscal stimulus," KAE Working Papers 2024-097, Warsaw School of Economics, Collegium of Economic Analysis.
    • Handle: RePEc:sgh:kaewps:2024097
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    File URL: http://hdl.handle.net/20.500.12182/1214
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    Keywords

    COVID-19; Fiscal expansion; Monetary policy; Redistribution;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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