Monetary authority's transparency and income inequality

Abstract

Abstract This paper analyzes how transparency from the monetary authority can affect the income inequality. The contribution is twofold. In the first part, we develop a theoretical model that considers heterogenous agent shopping‐time economy with a lack of transaction technology between rich and poor to observe the effect of central bank transparency on income inequality. The second part provides empirical evidence through panel data methodology that draws on 37 developing countries for the period 1992 to 2012. Our findings indicate that, in general, the monetary authority's transparency is an important tool to reduce income inequality between rich and poor when there are some advantages for the first group.

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