Unpacking the interconnectedness between macro economic policies and socioeconomic outcomes: A case of monetary policies and wealth inequality in the ASEAN region

This study aims to link the interconnectedness between the dynamic of macroeconomic policies and the distribution of wealth in the Association of Southeast Asian Nations (ASEAN) context through the lens of monetary policy. Time series and panel data from the World Inequality Database (WID) for six ASEAN countries from 2000 to 2021 and the panel vector autoregression (PVAR) were used to analyze the dynamic interactions between monetary policy and wealth inequality. The results suggest that lowering the policy interest rate, increasing inflation, and economic growth lead to a significant increase in wealth inequality in the short run. The impulse response function of the top 1% and top 10% wealthiest are more noticeable than those of the middle 40% and the bottom 50%. Additionally, the study highlights an interesting temporal dynamic, suggesting that the effects of monetary policy don't manifest instantaneously. Instead, these effects evolve gradually. This time lag indicates the complexity of how monetary interventions interact with economic factors and underscores the importance of patience and careful observation when assessing the outcomes of such policy decisions. The study's implications emphasize the importance for policymakers to consider the distributional effects of monetary policy in the long run policy objective.