Discussion paper

DP15734 Monetary policy and racial inequality

This paper aims at an improved understanding of the relationship between monetary policy and racial inequality. We investigate the distributional effects of monetary policy in a unified framework, linking monetary policy shocks both to earnings and wealth differentials between black and white households. Specifically, we show that, although a more accommodative monetary policy increases employment of black households more than white households, the overall effects are small. At the same time, an accommodative monetary policy shock exacerbates the wealth difference between black and white households, because black households own fewer financial assets that appreciate in value. Over a five year horizon, the employment effects remain substantially smaller than the countervailing portfolio effects.


Bartscher, A, M Kuhn, M Schularick and P Wachtel (2021), ‘DP15734 Monetary policy and racial inequality‘, CEPR Discussion Paper No. 15734. CEPR Press, Paris & London. https://cepr.org/publications/dp15734