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How does monetary policy affect income and wealth inequality? Evidence from quantitative easing in the euro area.
- Source :
- Journal of Applied Econometrics; Aug2024, Vol. 39 Issue 5, p746-765, 20p
- Publication Year :
- 2024
-
Abstract
- Summary: This paper evaluates the impact of quantitative easing on income and wealth of individual euro area households. We first estimate the aggregate effects of a quantitative easing (QE) shock, identified by means of external instruments, in a multi‐country vector autoregression (VAR) model with unemployment, wages, gross operating surplus, interest rates, house prices, and stock prices. We then distribute the aggregate effects across households using a reduced‐form simulation on micro‐data, which captures the portfolio composition, the income composition, and the earnings heterogeneity channels of transmission. The earnings heterogeneity channel is important: QE compresses the income distribution because many households with lower incomes become employed. In contrast, monetary policy has only negligible effects on the Gini coefficient for wealth: While high‐wealth households benefit from higher stock prices, middle‐wealth households benefit from higher house prices. [ABSTRACT FROM AUTHOR]
Details
- Language :
- English
- ISSN :
- 08837252
- Volume :
- 39
- Issue :
- 5
- Database :
- Complementary Index
- Journal :
- Journal of Applied Econometrics
- Publication Type :
- Academic Journal
- Accession number :
- 178973625
- Full Text :
- https://doi.org/10.1002/jae.3053