Monetary policy shifts resources, dampening inflation and impacting inequality in Canada.
The paper explores how low interest rates after the financial crisis in Canada may have affected inflation and inequality. By analyzing different models, the researchers found that the monetary policy helped maintain inequality by shifting resources from lower-income individuals, who tend to spend more. This led to lower overall demand and less inflation than expected. The study suggests that not considering how different income groups respond to monetary policy could lead to overestimating the impact on inflation.