A0163
Title: A novel structural mixed autoregression with aggregate and functional variables
Authors: Yoosoon Chang - Indiana University (United States) [presenting]
Soyoung Kim - Seoul National University (Korea, South)
Joon Park - Indiana University (United States)
Abstract: The aim is to investigate the interactions between macroeconomic aggregates and income distribution by developing a structural VAR model with functional variables. With this novel empirical approach, the analysis of the effects of various shocks on the income distribution on macro aggregates and the impact of macroeconomic shocks on the income distribution is enabled. The main findings focus on the contractionary monetary policy shocks improving income inequality when the re-distributive effect beyond the negative aggregate level effect is achieved by reducing the number of low- and high-income people while increasing the number of middle-income people; however, contractionary monetary policy shocks worsen income inequality when the aggregate income shift is taken into account. Secondly, shocks to income distribution potentially have a substantial effect on output fluctuations.
