Monetary Policy Shocks and their Effects across the Wealth Distribution: Evidence from new European data

Simone Cima and Marco Moreno
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Simone Cima: Central Bank of Ireland and Department of Economics, Trinity College Dublin.

No 6/RT/25, Research Technical Papers from Central Bank of Ireland

Abstract: We use new data on the distribution of wealth in the euro area and employ panel local projections to estimate the different impact of ECB monetary policy shocks on households across the wealth distribution. We look at how policy affects the value of their assets, the composition of their balance sheets, their investment decisions, and overall wealth inequality. We find that in response to a contractionary shock, poorer households display a substantial decline in their assets and in their overall net wealth. Conversely, the total wealth of the very richest is not significantly affected. This different response leads to a moderate increase in overall wealth inequality. We further perform a decomposition of asset movements caused by the shock, isolating the effect of revaluations and of household investment. We observe that the response of household wealth due to a monetary policy shock occurs primarily through revaluation effects.

Keywords: Wealth Inequality; Monetary Policy; Distributional Wealth Accounts; Local Projections. (search for similar items in EconPapers)
JEL-codes: D31 E44 E52 (search for similar items in EconPapers)
Date: 2025-07
New Economics Papers: this item is included in nep-eec and nep-mon
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Working Paper: Monetary policy shocks and their effects across the wealth distribution: evidence from new European data (2025)
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Persistent link: https://EconPapers.repec.org/RePEc:cbi:wpaper:6/rt/25

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