Unconventional Monetary Policy and Wealth Inequalities in Great Britain

Apostolos Fasianos and Anastasios Evgenidis

No 14656, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper explores whether unconventional monetary policy operations have redistributive effects on household wealth. Drawing on household balance sheet data from the Wealth and Asset Survey, we construct monthly time series indicators on the distribution of different asset types held by British households for the period that the monetary policy switched, as the policy rate reached the zero-lower bound. Using this series, we estimate the response of wealth inequalities on monetary policy, taking into account the effect of unconventional policies conducted by the Bank of England in response to the Global Financial Crisis. Our evidence reveals that unconventional monetary policy shocks have significant and lingering effects on wealth inequality: the shock raises wealth inequality across households, as measured by their Gini coefficients, percentile shares, and other standard inequality indicators. Additionally, we explore the effects of different transmission channels simultaneously. We find that the portfolio rebalancing channel and house price effects widen the wealth gap, outweighing the counterbalancing impact of the savings redistribution and inflation channels. The findings of our analysis help to raise awareness of central bankers about the redistributive effects of their monetary policy decisions.

Keywords: Monetary policy; Quantitative easing; Wealth inequality; Household portfolios; Var; Survey data (search for similar items in EconPapers)
JEL-codes: D31 E21 E52 H31 (search for similar items in EconPapers)
Date: 2020-04
New Economics Papers: this item is included in nep-eec, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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Journal Article: Unconventional Monetary Policy and Wealth Inequalities in Great Britain (2021)
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