Faculty Mentor(s)
Dr. Paul Koch
Project Type
Honors Program project
Scholarship Domain(s)
Scholarship of Discovery
Presentation Type
Presentation
Abstract
Background
Contractionary monetary policy has long run effects on inequality (Feldkircher & Kakamu, 2018). However, other forms of monetary policy do not have a clear effect on income inequality. Central banks defend the position that other factors are the driving forces behind income inequality (Powell, 2018).
Methodology
This investigation utilized ANOVA Regression analysis to determine if income inequality, as measured by wage growth by sector, is related to interest rates in the United States and Spain. If applicable, slopes of the regression lines for each sector were compared to see if they were significantly different, in a statistical sense.
Results
At interest rates above 0.4 percent in the United States, the Federal Funds Rate has asymmetric effects on the sectors studied. In Spain, there is no clear relationship between the European Central Bank (ECB) rate of discount and wage growth, so tests of the slope were not relevant.
Conclusion
In the United States, higher, or contractionary, rates of interest appear to have an impact on income inequality. This is in line with the results of previous studies.
Permission Type
This work is licensed under a Creative Commons Attribution 4.0 License.
Included in
The Statistical Relationship between Income Inequality and Monetary Policy in Spain and the United States
Background
Contractionary monetary policy has long run effects on inequality (Feldkircher & Kakamu, 2018). However, other forms of monetary policy do not have a clear effect on income inequality. Central banks defend the position that other factors are the driving forces behind income inequality (Powell, 2018).
Methodology
This investigation utilized ANOVA Regression analysis to determine if income inequality, as measured by wage growth by sector, is related to interest rates in the United States and Spain. If applicable, slopes of the regression lines for each sector were compared to see if they were significantly different, in a statistical sense.
Results
At interest rates above 0.4 percent in the United States, the Federal Funds Rate has asymmetric effects on the sectors studied. In Spain, there is no clear relationship between the European Central Bank (ECB) rate of discount and wage growth, so tests of the slope were not relevant.
Conclusion
In the United States, higher, or contractionary, rates of interest appear to have an impact on income inequality. This is in line with the results of previous studies.