Rising Wealth Inequality: Intergenerational Links, Entrepreneurship, and the Decline in Interest Rate

2020 ◽  
Author(s):  
Ayse Imrohoroglu ◽  
Kai Zhao
Keyword(s):  
Interest Rate ◽  
Wealth Inequality ◽  
Intergenerational Links

scholarly journals Endogenous Partial Insurance and Inequality

2019 ◽  
Vol 18 (5) ◽  
pp. 2270-2314
Author(s):  
Eric Mengus ◽  
Roberto Pancrazi
Keyword(s):  
Interest Rate ◽  
Middle Class ◽  
Wealth Inequality ◽  
Consumption Smoothing ◽  
Insurance Market ◽  
Asset Markets ◽  
Asset Accumulation ◽  
Poor Households ◽  
Participation Costs ◽  
Partial Insurance

Abstract In this paper, we propose a model of endogenous partial insurance and we investigate its implications for macroeconomic outcomes, such as wealth inequality, asset accumulation, interest rate, and consumption smoothing. To this end, we include participation costs to state-contingent asset markets into an otherwise standard Aiyagari (1994) model. We highlight the resulting nonmonotonic relationship between wealth and insurance-market participation when insurance is costly. Poor households remain uninsured, middle-class households participate in the insurance market, whereas rich households decide to self-insure by only purchasing risk-free assets. After theoretically characterizing the endogenous partial insurance equilibrium, we quantify its effect, emphasizing the roles of a participation channel and an interest rate channel.

scholarly journals WEALTH INEQUALITY AND OPTIMAL MONETARY POLICY

2010 ◽  
Vol 14 (5) ◽  
pp. 629-644 ◽  
Author(s):  
Ryoji Hiraguchi
Keyword(s):  
Interest Rate ◽  
Incentive Compatibility ◽  
Wealth Inequality ◽  
Nominal Interest Rate ◽  
Optimal Monetary Policy ◽  
Friedman Rule ◽  
Initial Wealth ◽  
The Government ◽  
The One ◽  
Compatibility Constraint

We study the money-in-the-utility-function model in which agents are heterogeneous in their initial wealth. We show that the Friedman rule is not optimal even if the government uses nonlinear income taxation for redistribution. A positive nominal interest rate raises social welfare because it relaxes the incentive compatibility constraint for highly endowed agents. Although the setup is close to that of da Costa and Werning [Journal of Political Economy (2008) 116, 82–112], who investigate skill heterogeneity, the role of the nominal interest rate in this paper here differs from the one in their model.

scholarly journals Macroeconomic Implications of Inequality and Income Risk

2021 ◽  
Vol 2021 (072) ◽  
pp. 1-49
Author(s):  
Aditya Aladangady ◽  
◽  
Etienne Gagnon ◽  
Benjamin K. Johannsen ◽  
William B. Peterman ◽  
...  
Keyword(s):  
Interest Rate ◽  
Real Interest Rate ◽  
Wealth Inequality ◽  
Labor Income ◽  
Income Risk ◽  
Risky Assets ◽  
Risk Premiums ◽  
Long Run ◽  
Return On Capital ◽  
Macroeconomic Implications

We explore the long-run relationship between income risk, inequality, and the macroeconomy in an overlapping-generations model in which households face uncertain streams of labor income and returns on their savings. To manage those risks, households can apportion their savings to a bond, whose return is safe and identical across households, and a productive asset, whose return is uncertain and can differ persistently across households. We find that greater polarization in households’ labor income and returns on their savings generally accentuates households’ demand for risk-free assets and the compensation they require for bearing risk, leading to higher measured income and wealth inequality, a lower risk-free real interest rate, and higher risk premiums. These findings suggest that the factors behind the observed rise in inequality over the past few decades might have contributed to the observed fall in the risk-free real interest rate and widening gap between the risk-free real interest rate and the rate of return on capital. We also find that the magnitude of the decline in the risk-free real interest rate and offsetting rise in risk premiums depend importantly on the source of income polarization, with the effects being especially large when greater inequality is caused by increased dispersion in returns on risky assets. Thus, the macroeconomic implications not only depend on the amount of inequality, but also the source of this inequality.

Dampak Kebijakan Moneter Pada Output Di Negara-Negara ASEAN Tahun 1980-2014

2017 ◽  
Vol 4 (1) ◽  
pp. 58-70
Author(s):  
Nur Widiastuti
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Fixed Effects ◽  
Empirical Studies ◽  
Negative Relationship ◽  
Least Square ◽  
Fixed Effects Model ◽  
State Data ◽  
Ordinary Least Square ◽  
The Impact

The Impact of monetary Policy on Ouput is an ambiguous. The results of previous empirical studies indicate that the impact can be a positive or negative relationship. The purpose of this study is to investigate the impact of monetary policy on Output more detail. The variables to estimatate monetery poicy are used state and board interest rate andrate. This research is conducted by Ordinary Least Square or Instrumental Variabel, method for 5 countries ASEAN. The state data are estimated for the period of 1980 – 2014. Based on the results, it can be concluded that the impact of monetary policy on Output shown are varied.Keyword: Monetary Policy, Output, Panel Data, Fixed Effects Model

Economic effects of monetary policy in Russia: What do large datasets tell us?

2020 ◽  
pp. 31-53 ◽  
Author(s):  
Anna A. Pestova ◽  
Natalia A. Rostova
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Economic Activity ◽  
Global Financial Crisis ◽  
Exchange Rate Regime ◽  
Aggregate Demand ◽  
Economic Effects ◽  
Theoretical Concepts ◽  
Empirical Estimates

Is the Bank of Russia able to control inflation and, at the same time, manage aggregate demand using its interest rate instruments? In other words, are empirical estimates of the effects of monetary policy in Russia consistent with the theoretical concepts and experience of advanced economies? This paper is aimed at addressing these issues. Unlike previous research, we employ “big data” — a large dataset of macroeconomic and financial data — to estimate the effects of monetary policy in Russia. We focus exclusively on the period after the 2008—2009 global financial crisis when the Bank of Russia announced the abandoning of its fixed ruble exchange rate regime and started to gradually transit to an interest rate management. Our estimation results do not confirm standard responses of key economic activity and price variables to tightening of monetary policy. Specifically, our estimates do not reveal a statistically significant restraining effect of the Bank of Russia’s policy of high interest rates on inflation in recent years. At the same time, we find a significant deteriorating effect of the monetary tightening on economic activity indicators: according to our conservative estimates, each of the key rate increases occurred in March and December 2014 had led to a decrease in the industrial production index by about 0.2 percentage points within a year.

Analysis of the Bank of Russia information policy

2017 ◽  
pp. 88-110 ◽  
Author(s):  
S. Drobyshevsky ◽  
P. Trunin ◽  
A. Bozhechkova ◽  
E. Gorunov ◽  
D. Petrova
Keyword(s):  
Interest Rate ◽  
Nonparametric Tests ◽  
Information Policy ◽  
Var Models ◽  
New Approach ◽  
Interest Rate Policy ◽  
News Reports ◽  
Internet Users ◽  
Rate Policy ◽  
Exchange Markets

The article investigates the Bank of Russia information policy using a new approach to measuring information effects on Russian data, including the analysis of the tonality of news reports, as well as internet users’ queries on Google. The efficiency of regulator’s information signals is studied using EGARCH-, VAR- models, as well as nonparametric tests. The authors conclude that the regulator communicates effectively in terms of the predictability of interest rate policy, the degree to which information signals affect the money and foreign exchange markets.

The Role of Different Channels in Transmitting Monetary Policy into Output and Price in Vietnam

2015 ◽  
pp. 20-40
Author(s):  
Vinh Nguyen Thi Thuy
Keyword(s):  
Monetary Policy ◽  
Exchange Rate ◽  
Interest Rate ◽  
Money Supply ◽  
Monetary Transmission ◽  
Impulse Response Functions ◽  
Short Run ◽  
The Exchange Rate ◽  
The Interest Rate ◽  
Interest Rate Channel

The paper investigates the mechanism of monetary transmission in Vietnam through different channels - namely the interest rate channel, the exchange rate channel, the asset channel and the credit channel for the period January 1995 - October 2009. This study applies VAR analysis to evaluate the monetary transmission mechanisms to output and price level. To compare the relative importance of different channels for transmitting monetary policy, the paper estimates the impulse response functions and variance decompositions of variables. The empirical results show that the changes in money supply have a significant impact on output rather than price in the short run. The impacts of money supply on price and output are stronger through the exchange rate and credit channels, but however, are weaker through the interest rate channel. The impacts of monetary policy on output and inflation may be erroneous through the equity price channel because of the lack of an established and well-functioning stock market.

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