Research
Publications
"Unconventional Monetary Policy and Economic Inequality," 2023, Economic Modelling, 126, 106380
Abstract: This paper evaluates the distributional effects of US unconventional monetary policy (UMP) implemented as an additional measure to confront recessions. In line with the literature, the results show that the UMP reduces the unemployment rate, moderately increases prices, and stabilizes financial conditions. Yet, it also increases income and wealth inequality, with a stronger effect on the latter. Central bank balance sheet policies tend to be the key measures that shape its general effects. The UMP raises capital income more than labor earnings, which leads to the relatively higher increase in income at the upper part of the distribution and as a result to the growth of income inequality. Also, the UMP increases stock prices more than house prices, which results in the relatively larger growth of wealth at the top end of the distribution, leading to the rise of wealth inequality. These results indicate the need for complementary fiscal policy measures.
"Distributional Impact of Monetary Policy in the UK: from Conventional to Unconventional Policy," with Fernando Ballabriga, 2022, Journal of Economic Policy Reform, 25 (4), Symposium on Monetary Policy, pp. 435-450
We evaluate the income distributional effect of monetary policy in the UK for the period 1993-2019, using a mixed frequency approach and a high frequency identification. Our results indicate that expansionary monetary policy increased income inequality during the unconventional policy subperiod 2009-2019. Looking at the income brackets, we find that this increase in inequality is primarily due to the positive impact of expansionary policy on the upper share of income distribution. Our counterfactual analysis reveals that unconventional monetary policy contributed to the increase in inequality, and that the response to COVID-19 is likely to do the same.
"The Distributive Effect of Monetary Policy: The Top One Percent Makes the Difference," 2017, Economic Modelling, 65, pp. 106-118 (postprint)
Abstract: The paper evaluates the distributional effect of monetary policy. The empirical analysis is implemented for the USA, where the dynamics in income inequality is mainly driven by the variation in the top one percent of the income distribution. The paper uses the inequality measures that represent the whole income distribution. The distributive effect of monetary policy is evaluated in the cases of different frequency data. To identify a monetary policy shock, the paper applies the contemporaneous and the long run identification methods. In particular, a cointegration relation is determined among the considered variables and the vector error correction methodology is used for the identification. The obtained results indicate that contractionary monetary policy decreases income inequality. These results can have important implications for the design of policies to reduce income inequality by giving more weight to monetary policy.
"Interrelation among Economic Growth, Income Inequality, and Fiscal Performance: Evidence from Anglo-Saxon Countries," 2016, Review of Public Economics, 217 (2), pp. 37-66
Abstract: The interrelation among economic growth, income inequality, and fiscal performance is very complex. The objective of this paper is to analyze the dynamic interrelations among these variables using structural VAR models and to examine transmission channels among them. The empirical analysis is implemented for the UK, the USA, and Canada, using the longest possible consistently measured comparable data on income inequality. We find that inequality has a negative effect on growth in the case of the UK while the effect is positive for the USA and Canada. An increase in inequality worsens fiscal performance for all the considered countries.
Working Papers
"The Dynamics of Wage Distribution Following Monetary Policy Expansion"
Abstract: This paper studies the dynamics of wage distribution in response to an unconventional monetary policy shock. Different layers of wage distribution are considered as well as various inequality measures are examined for it. The results show that unconventional monetary policy raises overall wage inequality measured by the Gini index and the 90-10 percentile ratio. The consideration of the effects of unconventional monetary policy on different percentile ratios and shares of wage distribution shows that high-earners benefit more than low-earners from the monetary policy expansion. These findings corroborate the hypothesis of capital-skill complementarity that expansionary monetary policy relatively more increases high-skilled employment, which raises the productivity of complementary capital.
“Comparing Conventional and Unconventional Monetary Policy Effects in the Euro Area and the United States,” with Fernando Ballabriga
Abstract: We use a consistent framework to compare the economic effects of conventional and unconventional monetary policies in the euro area (EA) and the United States (US) during the period 1999-2019. We find that policy actions have stronger effects during the conventional period compared to the unconventional period. We attribute this difference to the low level of the neutral policy rate since 2009, which affects the effectiveness by making the zero-lower-bound binding. We also find that the effectiveness of unconventional monetary policy in terms of target impact is weaker in the EA than in the US, a result that we attribute to differences in the central bank institutional design, which significantly curtailed the policy tool-box of the European Central Bank at the beginning of the unconventional period. At the same time, unconventional monetary policy effectively eases financial conditions in both the EA and the US.
Work in Progress
"Growth in Stress in the Euro Area," with Vladimir Rodríguez-Caballero and Esther Ruiz
"Climate Volatility and Economic Conditions," with Juan Miguel Marin and Helena Veiga
Other Papers and Publications
"The Sensitivity Analysis of the DSGE Model of the Armenian Economy," 2010, Banber of the Central Bank of Armenia, the second quarter, pp. 90-112
"The Evaluation of the New Keynesian Models of Price and Wage Inflation for Armenia," 2009, Central Bank of Armenia, working paper
"Exchange Rate Exposure in Armenia," 2008, Central Bank of Armenia, working paper
"Modeling Investment Behavior in Armenia for Forecasting," 2007, Banber of the Central Bank of Armenia, the first quarter, pp. 124-147