Haroon Mumtaz , Queen Mary University of London Angeliki Theophilopoulou , University of Westminister
February 19, 2015
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The UK has experienced a dramatic increase in earnings and income inequality over the past fourdecades. We use detailed micro level information to construct historical measures of inequalityfrom 1968 to 2008. We study whether monetary policy shocks played a significant role in explainingthis increase before and after 1993. We find that contractionary monetary policy shocks lead to adeterioration in earnings and income inequality and contribute to its fluctuation. Our evidencesuggest that this effect is smaller during the inflation targeting period.
J.E.L classification codes: E2, E3, E4, E5
Keywords:Inequality, Earnings, Income, Mixed frequency Bayesian SVAR, Monetary policy shocks