Does Trade Openness Impact the Link Between Monetary Policy and Both Income Inequality and Consumption Inequalities?

  • Eliphas Ndou
  • Thabo Mokoena


Evidence reveals that positive trade openness shock reduces both the income and consumption inequalities. Evidence from counterfactual VAR models which shut off the trade openness variables in transmitting contractionary monetary policy shocks to income inequality, reveals that the counterfactual income inequality growth rises more than the actual reaction. This suggests that trade openness channel dampens the rising income inequality due to contractionary monetary policy shock. The trade openness channel mitigates the increase in income inequality by nearly half of the peak increase, following contractionary monetary policy shock.


  1. Dutt, A. K., & Mukhopadhyay, K. (2009). International institutions, globalisation and inequality among nations. Progress in Development, 9(4).Google Scholar
  2. World Economic Outlook, October 2007: Globalization and Inequality.

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© The Author(s) 2019

Authors and Affiliations

  • Eliphas Ndou
    • 1
    • 3
    • 4
  • Thabo Mokoena
    • 2
  1. 1.Economic Research DepartmentSouth African Reserve BankPretoriaSouth Africa
  2. 2.Department of Economic, Small Business Development, Tourism and Environmental AffairsFree State Provincial GovernmentBloemfonteinSouth Africa
  3. 3.School of Economic and Business SciencesUniversity of the WitwatersrandJohannesburgSouth Africa
  4. 4.Wits Plus, Centre for Part-Time StudiesUniversity of the WitwatersrandJohannesburgSouth Africa

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