The Unassuming Economist

From a paper by Hippolyte Balima, Alexandru Minea, and Cezara Vinturis:

“We investigate the effect of inflation targeting on income inequality across a comprehensive panel of 152 countries spanning over four decades. Using the entropy balancing methodology to address endogeneity issues, we find that inflation targeting significantly increases income inequality. This effect, which is robust across various alternative methods and specifications, is driven by an increase (decrease) in the income share of relatively rich (poor) households. In addition, the impact of inflation targeting is not uniform but varies conditional on redistribution policies, inflation targeting features, the level of economic development, and country-specific characteristics. Our findings contribute to the ongoing discussion on the broad socioeconomic implications of the monetary policy, including measures to mitigate the potential side effects on income distribution.”