Does Price Stability Impact the Link Between Income Inequality and Consumption Inequality?
Evidence reveals that consumption inequality rises significantly to positive income inequality shocks. A counterfactual VAR analysis indicates that high inflation amplifies the increase in consumption inequality to positive income inequality shocks when inflation exceeds the 6 % threshold. In addition, evidence reveals that low inflation dampens the increase in consumption inequality when inflation is below the 6 % threshold. This evidence reveals that price stability matters. Therefore, policymakers should enforce price stability to weaken the link between the income inequality and consumption inequality.
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