Monetary Policy and Income Inequality in the Regions of the Russian Federation

Income inequality can affect economic activity both negatively and positively. In Russia inequality has a negative context, as it reduces the incentives of the population to get an education and to develop professionally. The topic of inequality has been actively studied in literature, but not enough attention has been paid specifically to the role of monetary policy. At the same time, in the existing literature on the impact of monetary policy on inequality, results are often opposite. It creates the problem of hard formulating of recommendations for monetary regulators. The contribution of the conducted research is analysis of this topic in the context of the regions of Russia. The impact of monetary policy on inequality measures has been analyzed in the paper for 79 regions of Russia. The model is based on regressions with fixed and spatial effects. To model spatial interaction, a matrix of spatial weights of regions was constructed basing on geographical data. The main result of the study is the confirmation of a statistically significant positive effect of monetary policy tightening on inequality indicators, but the reverse effect of reducing inequality from monetary policy easing has not been identified. At the same time, the tightening of monetary policy increases inequality the most in the group of regions with a high degree of inequality.