Yamada Tomoaki    Department   Undergraduate School  , School of Commerce    Position   Professor
Language	English
Publication Date	2017/06
Type	Academic Journal
Title	Effects of Monetary Policy Shocks on Inequality in Japan
Contribution Type	Co-authored (other than first author)
Journal	BIS Working Paper
Journal Type	Japan
Publisher	Bank for International Settlements
Volume, Issue, Page	642
Author and coauthor	Masayuki Inui, Nao Sudo and Tomoaki Yamada
Details	Impacts of monetary easing on inequality have recently attracted increasing attention. In this paper, we use the micro-level data of Japanese households to study the distributional effects of monetary policy. We construct quarterly series of income and consumption inequality measures from 1981 to 2008, and estimate their response to a monetary policy shock. We do find that monetary policy shocks do not have statistically significant impacts on inequalities across Japanese households in a stable manner. We find evidence, when considering inequality across households whose head is employed, an expansionary monetary policy shock increased income inequality through a rise in earnings inequality, in the period before the 2000s. Such procyclical responses are, however, scarcely observed when the current data is included in the sample period, or when earnings inequality across all households is considered. We also find that, transmission of income inequality to consumption inequality is minor even during the period when procyclicality of income inequality was pronounced. Using a two-sector dynamic general equilibrium model with attached labor inputs, we show that labor market flexibility is the central to the dynamics of income inequality after monetary policy shocks. We also use the micro-level data of households' balance sheet and show that distributions of households' financial assets and liabilities do not play a significant role in the distributional effects of monetary policy.