Quantitative Economics

Journal Of The Econometric Society

Edited by: Stéphane Bonhomme • Print ISSN: 1759-7323 • Online ISSN: 1759-7331

Quantitative Economics: Jul, 2023, Volume 14, Issue 3

Redistribution and the Monetary-Fiscal Policy Mix

https://doi.org/10.3982/QE2030
p. 817-853

Saroj Bhattarai, Jae Won Lee, Choongryul Yang

We show that the effectiveness of redistribution policy is tied to how much inflation it generates, and thereby to monetary‐fiscal adjustments that ultimately finance the transfers. In the monetary regime, taxes increase to finance transfers while in the fiscal regime, inflation rises, imposing inflation taxes on public debt holders. We show analytically that the fiscal regime generates larger and more persistent inflation than the monetary regime. In a two‐sector model, we quantify the effects of the CARES Act in a COVID recession. We find that transfer multipliers are larger, and that moreover, redistribution is Pareto improving, under the fiscal regime.


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Supplemental Material

Supplement to "Redistribution and the Monetary–Fiscal Policy Mix"

Saroj Bhattarai, Jae Won Lee, and Choongryul Yang

This online appendix contains material not found within the manuscript.

Supplement to "Redistribution and the Monetary–Fiscal Policy Mix"

Saroj Bhattarai, Jae Won Lee, and Choongryul Yang

This zip file contains the replication files for the manuscript.