Research On The Income Distribution Effect Of Monetary Polic

The report of the 18th National Congress of the Communist Party of China,the report of the 19 th National Congress of the Communist Party of China,and the "14th Five-Year Plan" have repeatedly emphasized that the gap in regional development and income distribution between urban and rural areas in my country is still large.On the road to achieving common prosperity,how to promote a more reasonable and orderly income distribution and thereby narrow the income distribution gap is a severe challenge that our country must face at present and in the future.In recent years,the impact of monetary policy on income distribution has received more and more attention from economists.Monetary policy will affect the inequality of income distribution through many channels such as interest rates,inflation,wage income,and asset allocation.The research on the relationship between monetary policy and income distribution inequality is helpful to understand how to regulate income distribution through monetary policy,and to enrich the tools and means of the government regulation in the redistribution stage,which is of great significance.Under the wave of globalization,the network externalities of monetary policy have become increasingly prominent.The spillover effect of monetary policy will be transmitted through trade and finance channels,which will be accelerate in the currency crisis,and then resulting in being contagious.This paper conducts an empirical analysis on the trade transmission of the income distribution effect of monetary policy,and studies the spillover effect of monetary policy during the currency crisis.It can provide early warning for the international external shocks my country faces on the road to building common prosperity.Based on the analysis methods in the literature,this paper conducts a theoretical analysis of the income distribution effect of monetary policy and the international spillover effect of monetary policy.Based on the conclusions obtained from the theoretical analysis,this paper respectively puts forward four core hypotheses.(1)A country’s monetary policy will have an impact on the degree of inequality in income distribution of its households;(2)Monetary policy will be transmitted through trade channels and have a spillover effect on inequality in income distribution;(3)During the currency crisis,monetary policy will also influence income distribution inequality through trade channels.In order to test the above research hypotheses,this article conducts an empirical analysis by the econometric model.Firstly,this paper uses panel data from 40 countries around the world from 1991 to 2018.I employ panel regression and dynamic panel regression to conduct empirical analysis,and divide the sample time interval through the detection method of multiple correlation structure breakpoints.The research found that:(1)There is a negative relationship between monetary policy shock indicators and income inequality indicators,that is,an expanded monetary policy will aggravate the inequality of social household income distribution;(2)The impact degree of income inequality distribution is related to the level of economic development of the country.Compared with countries with lower per capita GDP,countries with higher per capita GDP have a greater impact on income inequality distribution by monetary policy;(3)Before 2007,the impact of monetary policy on inequality in income distribution was relatively weak.During the global financial crisis from 2008 to 2010,the impact was of great significant,while it is not significant after 2011.By the empirical investigation,this article believes that the monetary authority should incorporate income distribution inequality into the policy objectives for comprehensive consideration in the process of implementing monetary policy.While adopting loose monetary policies,it is necessary to implement supporting measures to suppress the increase in income distribution inequality,such as the adjustments of the capital income tax and real estate tax policies;In addition,monetary policy has a greater impact on income distribution inequality during the financial crisis.During the crisis,the monetary authorities in various countries often adopted extremely loose monetary policies to provide liquidity to the market to get rid of the crisis,but this will also greatly aggravate the income inequality distribution among social households.Therefore,this article suggests that our country should also prepare monetary policy plans for the outbreak of financial crises at the same time of preventing risks,and consider income distribution inequality.Give play to the role of monetary policy on the premise of the goal of equality policy,adopt restrained loose monetary policy,and avoid "overwhelming flooding" aggravating the inequality of income distribution in social households.Secondly,this paper also conducts an empirical test on the trade transmission channel of the income distribution effect of monetary policy,by constructing a spatial Dubin model containing exogenous monetary policy shocks and a spatial Dubin model containing exogenous monetary policy shocks and currency crisis dummy variables.,And use the spatial weight matrix based on the trade integration index for empirical analysis.The research found that:(1)Monetary policy will have a negative impact on income distribution inequality through trade channels,that is,expansionary monetary policy will exacerbate income distribution inequality,and this effect will be manifested as an indirect spillover effect through trade channels.In other words,the country’s expansionary monetary policy will aggravate the inequality of income distribution in countries with close trade with the country;(2)The relationship between monetary policy shocks and income inequality during the currency crisis is also negative,that is,currency The shock of loose monetary policy during the crisis will exacerbate the inequality of income distribution,and this effect will be manifested as a direct effect and an indirect spillover effect.That is to say,an expansionary monetary policy shock will not only aggravate the inequality of income distribution in the country,but also Transmitting through trade channels affects the degree of inequality in income distribution in countries with close trade relations with the country.Based on the comparison of the results obtained using different spatial measurement regression models and the comparison of the regression results using different geographic spatial weight matrices,the above conclusions are robust,and the spatial spillover effect of monetary policy on income distribution inequality is not reflected in geographic proximity and geographic proximity.In addition,in response to the endogenous problem of using the economic distance spatial weight matrix for spatial measurement regression,this article also uses the spatial weight matrix of exogenous trade integration based on the data from 2016 to 2020 to test the robustness.The results show the above conclusions.It is still robust and reliable.Based on the above conclusions,this article believes that when a country adopts a loose monetary policy,the domestic interest rate drops and the money supply increases,the domestic currency will have depreciation pressure at this time.During the currency crisis,the domestic currency will also depreciate significantly,and the domestic currency will depreciate.It will enhance the export competitiveness of domestic commodities,which will reduce the export of other countries and make them face trade deficit pressure.Other countries will also be more inclined to adopt loose monetary policies in order to stimulate exports,which will aggravate the income distribution of their domestic social households.Degree of equality.Therefore,in the new era of opening up to the outside world,my country must actively guard against international monetary policy shocks and currency crisis shocks.Exports must be encouraged,but economic growth cannot be overly dependent on exports.When facing international monetary policy shocks and currency crisis shocks,monetary policy and corresponding supporting policies should take the promotion of internal circular growth as the primary goal and avoid expanding the income distribution gap between the rich and the poor.Finally,this article also studies the impact of quantitative easing monetary policy on income distribution.By combing the theoretical basis and practical situation of quantitative easing monetary policy,we can see that traditional monetary policy is in a low interest rate or zero interest rate environment,as well as during the financial crisis,the policy transmission channels will become ineffective due to the obstruction of the policy transmission channels.There is no way to function under such conditions.The quantitative easing monetary policy can repair the monetary policy transmission channels by directly injecting liquidity into the financial market and forward-looking guidance.,So that it can stimulate the economy to get out of trouble and grow.Judging from the practice of quantitative easing monetary policy in Japan and the United States,quantitative easing monetary policy has indeed played a certain role in avoiding economic recession and getting rid of deflation expectations,but the social problems it brings are becoming increasingly prominent.Issues such as the rapid rise in price levels and the growing gap between the rich and the poor.This paper uses Japan as the research object for empirical analysis,using vector autoregressive models and Bayesian estimation methods to conduct empirical tests on Japan’s monthly time series data from January 2000 to December 2020.The study found that Japan’s quantitative easing monetary policy is the Granger cause of inequality in income distribution.A positive quantitative easing monetary policy shock will curb the growth of income inequality in the short term,but it will still aggravate households in the medium and long term.The degree of inequality in income distribution.Quantitative easing monetary policy can promote economic growth in the short term.Although it can increase the employment rate through wage income channels,thereby reducing income distribution inequality,the asset price increase caused by the asset allocation channel of the medium and long-term loose monetary policy is still the effect of increasing inequality on income distribution.Therefore,as to whether my country should include quantitative easing in the central bank’s monetary policy adjustment toolbox,this article believes that a cautious approach should be taken.Although quantitative easing monetary policy stimulates economic recovery in the short term during the financial crisis,it will also bring greater socio-economic hidden dangers.And it is easy to break out of a bigger crisis,resulting in a vicious circle of financial crises and increasing inequality in income distribution.In addition,it is necessary to innovate new precision monetary policy tools to unblock the monetary policy transmission channels to avoid the failure of conventional monetary policy during the crisis.