Central banks have traditionally focussed on aggregate outcomes. In part this was due to data limitations – it was hard to identify distributional effects without large individual-level panels. But it also reflected the conventional view that monetary policy works largely through intertemporal substitution, which was thought to affect everyone in much the same way.
Recent research has challenged this view. HANK models suggest that monetary policy works largely through income effects. In countries where variable rate mortgages are common, cash flow channels also seem to be important (e.g. La Cava, Hughson and Kaplan 2016). Even if the aggregate effects of monetary policy are probably about as large as we always thought they were, it now appears that monetary policy works largely through redistribution.
If this is true, should we still rely on monetary policy as the main tool for macroeconomic stabilisation? And is a high degree of central bank independence still appropriate, or should central banks face greater oversight?