Monetary Policy and Inequality: The Finnish Case

Mäki-Fränti, Petri; Silvo, Aino; Gulan, Adam; Kilponen, Juha

doi:10.2139/ssrn.4014139

Cited by 5 publications

(2 citation statements)

References 18 publications

(22 reference statements)

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“…While the market-based framework may explain executive compensation developments in one country in one period, e.g., in Finland since the mid-1990s, as this paper found, or in the US after 1980 (Frydman and Saks 2010;Gabaix and Landier 2008), it cannot account for executive compensation developments across different contexts, where the relationship between executive compensation and firm size is likely to differ depending on the distribution of power in society. Further, previous research on increased income inequality in Finland has highlighted multiple causes, including increased capital incomes, reduced tax progressivity, reduced redistributive government spending, weakened unions, increased unemployment, increased firm profitability, and increased disparities in earned income (Mäki-Fränti et al 2022;Heino 2021;Riihelä et al 2010;Roikonen 2021;Riihelä and Tuomala 2020). Each of these changes is aligned with the pro-employer shift observed in the congruence analysis.…”

Section: Discussionmentioning

confidence: 99%

Politics, markets, and CEO pay: a congruence analysis of two competing theoretical explanations of executive compensation at large firms in Finland

Rosenblum

2023

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This article conducts a congruence analysis on the historical development of CEO pay at large firms in Finland to contribute to the debate between prominent competing theoretical perspectives on the causes of CEO pay and consequent income inequality. It examines the alignment of the empirical evidence on CEO pay in Finland with a market-based theory, which emphasizes market forces, and a politics-based theory, which emphasizes the distribution of power between labor and employers, drawing from Power Resources Theory, to see whether a particular perspective holds more explanatory power. The congruence analysis finds that the expectations of the politics-based perspective are aligned with CEO pay developments in the 1970s and 1980s, when labor was strong and CEO pay was modest, as well as the difference between CEO pay developments before the mid-1990s and afterward, when employers were strong and CEO pay grew rapidly to new heights. It also finds that the market-based perspective is helpful for explaining developments starting in the mid-1990s. The impact of the market on CEO pay is shown to be contingent on the distribution of power in society.

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Section: Discussionmentioning

confidence: 99%

Politics, markets, and CEO pay: a congruence analysis of two competing theoretical explanations of executive compensation at large firms in Finland

Rosenblum

2023

Qual Quant

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“…Moreover, monetary policy can influence income disparity both directly via financial markets and indirectly via general equilibrium consequences, such as promoting economic activities and reducing unemployment and increasing wages. The total influence of monetary policy (MP) on income inequality is theoretically unclear (Mäki-Fränti et al , 2022). However, some researchers indicate that expansionary and contractionary monetary policy reduces/increases income inequality (Andersen et al , 2021; Taghizadeh‐Hesary et al , 2020; Siami‐Namini et al , 2020; Hohberger et al , 2019).…”

Section: Introductionmentioning

confidence: 99%

Monetary policy effectiveness in Asian developing economies: the moderating role of financial sector development

Azam

Khan

Saleem

2023

JFEP

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Purpose This study aims to explore the impact of monetary policy on bank lending rate with the moderating effects of financial sector development for eight Asian developing economics. Design/methodology/approach This study uses panel autoregressive distributed lag/pooled mean group estimation over the period ranging from 1980 to 2020. Findings The empirical results exhibit an inverse link between monetary policy measured by broad money supply on the bank lending rate, indicating that the increase in the money supply by the central bank lowers the demand for loans and thereby lowers the cost of loan. Moreover, financial sector development decreases the lending rate and thus lowers cost of loan. It is also noted that the interactive term of monetary policy by lending broad money supply and financial sector development showed a positive impact on the lending rate in selected Asian developing countries during the period under the study. Practical implications The outcomes have many relevant policy implications that stronger financial development sector contributes to the efficiency of monetary policy. Regulators and policymakers are therefore recommended to pursue greater financial sector development to lower the cost for fund searchers and to lower the cost of loans, money supply increase is suggested. Originality/value This study contributes to the extant literature on the factors affecting lending rate with the prime aims of monetary policy effectiveness. This study also included financial sector development with some other variables and an interactive term of monetary policy with financial development to have new insight impact of both on the lending rate in developing Asian economies.

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