Asymmetric effects of monetary policy on income inequality

This study examines asymmetric effects of monetary policy on income inequality in the U.S. from 1980 to 2019. Using data from the Consumer Expenditure Survey, the study constructs extended Gini coefficients for total income and its four sources: wage, business, financial, and miscellaneous income. Their responses to monetary policy were estimated using the single-equation approach of Kilian and Vigfusson (2011). Contractionary monetary policy tends to increase total income inequality more strongly than expansionary policy. This asymmetry is primarily driven by wage income inequality.