Distributional effects of monetary policy and their impact on economic welfare

Анотація

Considering the distributional effects of monetary policy allows for a more balanced policy that meets both macroeconomic goals and the population's needs. The presented mechanism of monetary policy impact on economic welfare operates through the interest rate, lending, exchange rate, and asset price channels, causing changes in income and wealth, and the substitution effect, which together affect the propensity to consume, debt behaviour, redistribution of income and wealth, purchasing power, consumption, investment, and debt burden. The interaction of monetary policy effects with heterogeneous household characteristics affects the distribution of income and wealth (through channels of redistribution of savings, unexpected inflation, interest rate effects, portfolio structure, income heterogeneity, and income structure), as well as unemployment and wages. Expanding the mechanisms of subsidised lending for socially vulnerable groups, promoting sustainable investment, and developing financial literacy will help increase monetary policy's effectiveness in ensuring economic welfare.

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