Monetary policy affects inequality
New research from Niels Johannesen and co-authors on Monetary Policy and Inequality hits front page in Børsen
If the interest rate is reduced by one percentage point, the richest percentage of the population will increase their disposable income by more than five percent, while it will only increase by 0.5 percent for those with the lowest incomes and 1.5 percent for those in the middle.
This is the result of Niels Johannesen’s research. The study also shows that an interest rate cut of a single percentage point increases the richest one percent share of total income by 3.5 percentage points, while the lowest income share falls by just under two percent. These effects are so significant, that the eased monetary policy may be an overlooked part of the explanation for the increasing inequality of recent years.