Exploring the Dynamic Shock of Unconventional Monetary Policy Channels on Income Inequality: A Panel VAR Approach
In response to the “Great Recession and Global Financial Crisis”, central banks had to deploy unconventional monetary policies (UMP) in order to fight the severe impact of the crisis. Therefore, the purpose of this study is to examine the dynamic shock of unconventional monetary policies through ear...
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| Format: | Article |
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MDPI AG
2022-08-01
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| Series: | Social Sciences |
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| Online Access: | https://www.mdpi.com/2076-0760/11/8/369 |
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| author | Lindokuhle Talent Zungu Lorraine Greyling |
| author_facet | Lindokuhle Talent Zungu Lorraine Greyling |
| author_sort | Lindokuhle Talent Zungu |
| collection | DOAJ |
| description | In response to the “Great Recession and Global Financial Crisis”, central banks had to deploy unconventional monetary policies (UMP) in order to fight the severe impact of the crisis. Therefore, the purpose of this study is to examine the dynamic shock of unconventional monetary policies through earning heterogeneity, income composition, and portfolio channels on income inequality in emerging economies covering the period 2000–2019, using the panel vector autoregressive (PVAR) model. A PVAR model was designed for this study because of its ability to address the dynamics of numerous entities considered in parallel. The findings suggest that the UMPs used by these countries’ central banks may have increased income inequality through all of the channels investigated in this study, as a shock to unconventional monetary policy results in a positive response in income inequality. Even when pre-tax income, held by the top 10%, is adopted to measure income inequality, the study yields similar results. It is evident that a central bank’s objective is and should be to fulfil its mandate of achieving maximum employment and price stability, thus bringing wide economic benefits. Thus, some forms of policies are more appropriate for addressing concerns about inequality (income policy or fiscal policy) than others. However, the current study alerts the central bank to the fact that monetary policies may have a wounding impact on income inequality. Therefore, the central banks should consider the cost of monetary policies on income inequality when drafting or implementing these kinds of policies. |
| first_indexed | 2024-03-09T03:50:03Z |
| format | Article |
| id | doaj.art-08d0e0d3cc81438883b38c443ff916a0 |
| institution | Directory Open Access Journal |
| issn | 2076-0760 |
| language | English |
| last_indexed | 2024-03-09T03:50:03Z |
| publishDate | 2022-08-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | Social Sciences |
| spelling | doaj.art-08d0e0d3cc81438883b38c443ff916a02023-12-03T14:28:39ZengMDPI AGSocial Sciences2076-07602022-08-0111836910.3390/socsci11080369Exploring the Dynamic Shock of Unconventional Monetary Policy Channels on Income Inequality: A Panel VAR ApproachLindokuhle Talent Zungu0Lorraine Greyling1Economics, Faculty of Commerce Administration and Law, University of Zululand, KwaDlangezwa 3886, South AfricaEconomics, Faculty of Commerce Administration and Law, University of Zululand, KwaDlangezwa 3886, South AfricaIn response to the “Great Recession and Global Financial Crisis”, central banks had to deploy unconventional monetary policies (UMP) in order to fight the severe impact of the crisis. Therefore, the purpose of this study is to examine the dynamic shock of unconventional monetary policies through earning heterogeneity, income composition, and portfolio channels on income inequality in emerging economies covering the period 2000–2019, using the panel vector autoregressive (PVAR) model. A PVAR model was designed for this study because of its ability to address the dynamics of numerous entities considered in parallel. The findings suggest that the UMPs used by these countries’ central banks may have increased income inequality through all of the channels investigated in this study, as a shock to unconventional monetary policy results in a positive response in income inequality. Even when pre-tax income, held by the top 10%, is adopted to measure income inequality, the study yields similar results. It is evident that a central bank’s objective is and should be to fulfil its mandate of achieving maximum employment and price stability, thus bringing wide economic benefits. Thus, some forms of policies are more appropriate for addressing concerns about inequality (income policy or fiscal policy) than others. However, the current study alerts the central bank to the fact that monetary policies may have a wounding impact on income inequality. Therefore, the central banks should consider the cost of monetary policies on income inequality when drafting or implementing these kinds of policies.https://www.mdpi.com/2076-0760/11/8/369earning heterogeneityemerging marketincome inequalityincome compositionportfolio compositionPVAR |
| spellingShingle | Lindokuhle Talent Zungu Lorraine Greyling Exploring the Dynamic Shock of Unconventional Monetary Policy Channels on Income Inequality: A Panel VAR Approach Social Sciences earning heterogeneity emerging market income inequality income composition portfolio composition PVAR |
| title | Exploring the Dynamic Shock of Unconventional Monetary Policy Channels on Income Inequality: A Panel VAR Approach |
| title_full | Exploring the Dynamic Shock of Unconventional Monetary Policy Channels on Income Inequality: A Panel VAR Approach |
| title_fullStr | Exploring the Dynamic Shock of Unconventional Monetary Policy Channels on Income Inequality: A Panel VAR Approach |
| title_full_unstemmed | Exploring the Dynamic Shock of Unconventional Monetary Policy Channels on Income Inequality: A Panel VAR Approach |
| title_short | Exploring the Dynamic Shock of Unconventional Monetary Policy Channels on Income Inequality: A Panel VAR Approach |
| title_sort | exploring the dynamic shock of unconventional monetary policy channels on income inequality a panel var approach |
| topic | earning heterogeneity emerging market income inequality income composition portfolio composition PVAR |
| url | https://www.mdpi.com/2076-0760/11/8/369 |
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