Monetary Policy and the Wealth Distribution

Alessandro Franconi and Giacomo Rella

Working papers from Banque de France

Abstract: Using the Distributional Financial Accounts of the United States, we study the effects of monetary policy on the wealth distribution. The direction and persistence of these effects depend on the policy instrument. Interest rate cuts initially reduce wealth inequality but increase it in the medium-run. Asset purchases, instead, increase wealth inequality but only temporarily. Housing is the main channel through which monetary policy affects wealth at the bottom while corporate equities explain wealth growth at the top. Using household-level data from the Panel Study of Income Dynamics, we document a wealth reversal at the bottom of the distribution: lower interest rates raise housing wealth in the short run but lead to higher mortgage debt and lower net wealth over time, contributing to the medium-term rise in inequality.

Keywords: Monetary Policy; Distributional Financial Accounts; Wealth Inequality (search for similar items in EconPapers)
JEL-codes: D31 E44 E52 (search for similar items in EconPapers)
Pages: 84 pages
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:1064

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