Monetary Policy Impact on Income Inequality in the Russian Regions


This paper focuses on the impact of the monetary policy on income inequality in the Russian regions in the short term. The 2015–2020 quarterly panel data analysis detects a considerable negative correlation between the key rate changes and inequality. Tougher monetary stance in the current period results in reduced inequality one year after. The correlation is more evident in the regions with higher average per capita household incomes, which may indirectly testify to the effect of financial segmentation channel, according to which financial assets of usually wealthier households depreciate due to increased key rate. Such an impact becomes weaker through the income composition channel, with a higher key rate leading to decreased wages and increased inequality. Some cases also imply a Fisher channel, traditionally redistributing wealth from higher-income creditors to lower-income borrowers; however, its effect is less pronounced.