Permanent URL to this publication: http://dx.doi.org/10.5167/uzh-51548
Ledoit, Olivier (2011). The Redistributive Effects of Monetary Policy. Working paper series / Department of Economics No. 44, University of Zurich.
We introduce a model of the economy as a social network. Two agents are linked to the extent that they transact with each other. This generates well-defined topological notions of location, neighborhood and closeness. We investigate the implications of our model for monetary economics. When a central bank increases the money supply, it must inject the money somewhere in the economy. We demonstrate that the agent closest to the location where money is injected is better off, and the one furthest is worse off. This redistribution channel is independent from the ones previously noted in the literature. Symmetrically, any decrease in the money supply redistributes purchasing power in the other direction. We also outline the testable implications of our model.
|Item Type:||Working Paper|
|Communities & Collections:||03 Faculty of Economics > Department of Economics|
Working Paper Series > Department of Economics
|JEL Classification:||E40, E50|
|Deposited On:||25 Nov 2011 10:13|
|Last Modified:||20 Oct 2012 18:12|
|Series Name:||Working paper series / Department of Economics|
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