Capital and income inequality: an aggregate-demand complementarity
Subject
Economics
Publishing details
CEPR discussion paper
Authors / Editors
Bilbiie F O; Kanzig D; Surico P
Biographies
Publication Year
2021
Abstract
A novel complementarity between capital and income inequality leads to a significant amplification of the effects of monetary policy on consumption. We characterize this finding analytically and quantitatively, using a model with heterogeneity in household wealth and income, nominal rigidities, capital, and idiosyncratic risk. A fiscal policy that redistributes capital income causes further amplification, whereas redistributing profits generates dampening.
Keywords
Aggregate demand; Capital; Complementarity; Heterogeneity; Income inequality; Monetary policy; Multiplier
Series Number
14118-4
Series
CEPR discussion paper