Impact of Monetary Policy on Economic Barriers

Comment la politique monétaire peut jouer sur la distribution de crédit aux ménages, et derrière jouer sur les inégalités? Les politiques monétaires expansionnistes jouent normalement sur la quantité de crédit et les taux d'intérêt payés par les ménages. Dans ce papier co-écrit avec Salima Ouerk (National Bank of Belgium), nous montrons que l'impact de la politique monétaire sur le volume de crédit des ménages en France est NUL pour les classes populaires et les classes moyennes. Seuls les ménages les plus aisés en profitent, et surtout pour de l'investissement locatif. Cela témoigne de l'importance de la distribution de crédit dans la dynamique des richesses, et doit nous inviter à agir sur la régulation du crédit et de l'immobilier. Je vais avoir le plaisir de présenter ce papier demain au laboratoire Centre for Economics at Paris-Saclay à l'Université d'Evry (Université Paris-Saclay). Title: The unequal distribution of credit: Is there any role for monetary policy? Abstract: Is current monetary policy making the distribution of credit more unequal? Using french household-level data, we document credit volumes along the income distribution. Our analysis centers on assessing the impact of surprises in monetary policy on credit volumes at different income levels. Expansionary monetary policy surprises lead to a surge in mortgage credit exclusively for households within the top 20% income bracket. Monetary policy then does not impact mortgage credit volume for 80% of households, whereas its effect on consumer credit exists and remains consistent across the income distribution. This result is notably associated with the engagement of this particular income group in rental investments. Controlling for bank decision factors and city dynamics, we attribute these results to individual demand factors. Mechanisms related to intertemporal substitution and affordability drive the impact of monetary policy surprises. They manifest through the policy's influence on collaterals and a larger down payment. The link to the seminar web page: https://lnkd.in/ej_kqTyt

The central bank's mandate is to target inflation while keeping in mind growth, but little is known about the effects of monetary policy on different types of households and businesses. Pleased to share my latest paper with Aariya Sen, just published in Emerging Markets Review, where we study the heterogenous effects of monetary policy. Contractionary monetary policy (higher interest rates) is supposed to reduce income by compressing demand conditions. Our contribution is to show that it reduces income inequality, because of the wages of high income households shrinking more and also due to fall in capital income. Interestingly, consumption inequality rises because low income households cut their spending more sharply than high income households. These are novel findings from the perspective of a developing economy. We hope this paper will inform the understanding of heterogenous effects of macroeconomic policy that is critical in emerging market economies. The paper is based on one chapter of Aariya's PhD thesis. The full paper is available here: https://lnkd.in/gNgzJNzi

Modern central banking has changed dramatically since 2008. Beyond setting interest rates, central banks now wield trillions in asset purchases and subsidised loans, actions often presented as technical fixes. However, as our new book "Crisis Cycle" explains, these policies are engines of wealth redistribution, creating winners and losers while distorting market incentives. We highlight three key channels: * The Great Risk Transfer: Quantitative Easing (QE) directly benefits bondholders and shifts significant duration risk from private markets to taxpayers. When rates rise, as they did recently, taxpayers bear the losses. * An Exclusive Club: Central banks pay interest on bank reserves, a safe and liquid asset, excluding ordinary citizens and businesses. This creates an imbalance, allowing banks to earn risk-free income while retail savers get far less. * The Stealth Bank Bailout: Programs like TLTROs offer banks exceptionally low-cost funding, even allowing them to profit by redepositing funds with the central bank. This indirect subsidy, coupled with broad collateral rules, distorts market discipline and transfers risk to taxpayers. These "emergency" measures risk becoming permanent, fostering a "collective moral hazard" where institutions expect bailouts, delaying necessary reforms. It's time to debate these hidden costs and ensure parliaments, not central banks, make decisions about risk and wealth distribution. Read more about these hidden costs and their implications: https://lnkd.in/dD4K6Prh

Although most text books on monetary Policy will agree with the latest MPS announced by Bangladesh Bank, the business community reacted with dissatisfaction. BB’s stance was predicated by inflation which is still running above 8% although it has gone down slightly from 9% which remained at that level for a while. In the meantime the outcome has been our credit growth is at historical lows. Bangladesh as a developing economy is used to 12%+ growth rates but this government is determined to bring inflation down. So the interest rates remain high with “tight” monetary policy inhibiting growth. This of course has an impact on unemployment rate which brings with it social consequences all round. Perhaps there could be scope for targeted increase in investments in certain sectors but this may be difficult under IMF conditionalities. We will await to see how our central bank deals with the situation going forward. https://lnkd.in/gUPy9X4B