Monetary Policy Shocks and Income Inequality in Nigeria: Do Effects of Anticipated and Unanticipated Shocks Differ?

Abstract

Given the spate of income inequality in developed and developing countries, monetary policy shocks have been identified as a determinant of rising income inequality in developing countries. Studies have examined the effects of types of monetary policy shocks on income inequality, however, the effects of nature (anticipated and unanticipated) of monetary policy shocks have not been investigated. Therefore, the study investigates whether anticipated and unanticipated monetary policy shocks differ in their impacts on income inequality in Nigeria, using the Dynamic Stochastic General Equilibrium approach. The results show that both anticipated and unanticipated shocks have the same effects on income inequality in Nigeria. It can be deduced that both shocks reduced income inequality in the country. The study, therefore, concludes that monetary policy authority should keep all stakeholders in the economy abreast of their decision to reduce the income inequality gap in the country.