The Effects of US Monetary Policy on Household Wealth by Race and Gender

Black households in the United States – particularly those headed by women – hold a fraction of the wealth of White households. Little is known about US monetary policy’s possible impact on these disparities. This study examines how monetary policy influences wealth by race, gender, and household structure in the US from 1984 to 2007. The study aggregates household-level wealth data to the state level and applies a new methodology from the monetary policy literature that identifies policy shocks through variation in states’ sensitivity to monetary policy. The adverse wealth effects of interest rate increases are found to be smaller for Black households in absolute terms, but these gaps disappear or reverse for Black woman-headed households when measured relative to average wealth. These findings complicate previous claims that contractionary policy reduces racial wealth gaps and may be explained by the links between care responsibilities, racial inequality, economic risk, and wealth erosion.HIGHLIGHTSUS monetary tightening reduces household wealth across race and gender groups.White married or cohabiting households experience the largest absolute wealth losses.Black woman-headed households face smaller absolute but larger relative wealth losses.Contractionary monetary policy shocks may widen racial and gender wealth disparities in relative terms.Financial strain among Black women reflects intersecting race, gender, and care burdens.