Template-Type: ReDIF-Paper 1.0 
Title: The redistributive power of business cycle fluctuations
Author-Name: Marcin Bielecki 
Author-Name: Michał Brzoza-Brzezina 
Author-Name: Marcin Kolasa 
Abstract: How do business cycles redistribute between generations, what are the redistribution channels and what role is played by monetary policy? We construct a New-Keynesian life-cycle model and estimate it for the United States. Business cycles redistribute significantly: fluctuations impact welfare of some cohorts by an equivalent of 30% of annual consumption. These first-order effects do not net out over a typical life cycle: some cohorts have been much less lucky than others. Life cycle aspects also amplify second-order costs of fluctuations. Monetary policy shocks are highly redistributive and, hence play an over-proportional role in driving redistribution: they are responsible for over 20% of its total amount. Systematic monetary policy has a quantitatively significant impact on redistribution as well: policy that responds strongly to inflation and output can substantially increase intergenerational redistribution.
Number: 2026-121
Length: 46 pages 
Creation-Date: 2026-02
Keywords: Business Cycles, Welfare Redistribution, Monetary Policy, Life-cycle Model
Classification-JEL: E24, E32, E47, E52
File-URL: https://hdl.handle.net/20.500.12182/1441
File-Format: Application/pdf
DOI: 10.33119/kaewps2026121
Handle: RePEc:sgh:kaewps:2026121