Monetary policy and the top one percent: Evidence from a century of modern economic history

Mehdi El Herradi (1) , Aurélien Leroy (2)

1 AMSE - Aix-Marseille Sciences Economiques
2 Larefi - Laboratoire d'analyse et de recherche en économie et finance internationales

This paper examines the distributional e ects of monetary policy in 12 OECD economies between 1920 and 2016. We exploit the implications of the macroeconomic policy trilemma with an external instrument approach to analyse how top income shares respond to monetary policy shocks. The results indicate that monetary tightening strongly decreases the share of national income held by the top one percent and vice versa for a monetary expansion, irrespective of the position of the economy. This e ect (i) holds for the top percentile and the ultra-rich (top 0.1% and 0.01% income shares), while (ii) it does not necessarily induce a decrease in income inequality when considering the entire income distribution. Our ndings also suggest that the e ect of monetary policy on top income shares is likely to be channeled via real asset returns.

Mots clés: monetary policy; top incomes; macroeconomic policy trilemma; external instrument

Domaines: Economies et finances

Mehdi El Herradi, Aurélien Leroy. Monetary policy and the top one percent: Evidence from a century of modern economic history. 2020. ⟨halshs-03080162⟩