 Central Banks Fuelling Inequality. A Comparative Case Study of Japan's Unconventional Monetary Policy 1999-2006Moritz Uhl
No 692, WIFO Working Papers from WIFO Abstract: Reoccurring instability keeps forcing central banks repeatedly to intervene in financial markets, since the 2007-2008 crisis most notably with massive asset purchases, whose popularisation was spearheaded by the Bank of Japan. This paper exploits the world's first implementation of quantitative easing in the vicinity of zero interest rates in Japan from 1999 through 2006 to evaluate their distributional impact by means of the synthetic control method. Comparing the actual and counterfactual development demonstrates that unconventional monetary policy increased the top 10 percent to bottom 50 percent income ratio by more than 28 percent. This exercise also detects a rise of more than 7 percent for the Gini coefficient which is beneath the corresponding value of 12.5 percent for the share of the top income decile. These results, together with evidence from capital and labour income trends as well as data on household ownership of financial assets, suggest that inequality widened via heightening asset prices converting into gains for richer income groups. Conditional upon structural features of an economy a negative distributional side effect of central banking's new tools may turn out to be of severe magnitude. Keywords: Japan; Income inequality; Unconventional monetary policy; Quantitative easing; Synthetic control method (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wfo:wpaper:y:2025:i:692 Access Statistics for this paper More papers in WIFO Working Papers from WIFO Contact information at EDIRC. |
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