Domestic and External Monetary Policy Shocks and Economic Inequality in the Republic of Korea

Abstract

This paper examines the linkage between monetary policy and economic inequalities in the open economy of the Republic of Korea. The coronavirus disease pandemic has raised renewed concerns about economic and social inequality. This paper constructs measures of income and wealth inequality in the Republic of Korea. Empirical results show that both domestic and external monetary policy shocks exert significant countercyclical effects on income inequality. However, for wealth inequality, the effects are very different. External policy shocks proxied by fluctuations in net capital flows seem to have significant effects on net wealth inequality.