Staff Reports
Monetary Policy and Racial Inequality
Number 959
January 2021 March 2022

JEL classification: E40, E52, J15

Authors: Alina K. Bartscher, Moritz Kuhn, Moritz Schularick, and Paul Wachtel

This paper aims at an improved understanding of the relationship between monetary policy and racial inequality. We investigate the distributional effects of monetary policy in a unified framework, linking monetary policy shocks both to earnings and wealth differentials between black and white households. Specifically, we show that, although a more accommodative monetary policy increases employment of black households more than for white households, the overall effects are small. At the same time, an accommodative monetary policy shock exacerbates the wealth difference between black and white households, because black households own fewer financial assets that appreciate in value. Over a five-year horizon, the employment effects remain substantially smaller than the countervailing portfolio effects.

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Author Disclosure Statement(s)
Alina Bartscher
I, Alina Kristin Bartscher, declare that I have no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

Moritz Kuhn
The author, Moritz Kuhn, declares that he has no relevant or material financial interests that relate to the research described in this paper.

Moritz Schularick
The author declares that (s)he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.

Paul Wachtel
Paul Wachtel declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
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