How Does Unconventional Monetary Policy Affect Inequality? Evidence from Japan

24 Pages Posted: 9 May 2014 Last revised: 12 May 2014

See all articles by Ayako Saiki

Ayako Saiki

University of London - School of Oriental and African Studies (SOAS); De Nederlandsche Bank - Monetary and Economic Policy Department

Jon Frost

Bank for International Settlements; De Nederlandsche Bank; University of Cambridge - Cambridge Centre for Alternative Finance

Date Written: May 8, 2014

Abstract

Inequality has been largely ignored in the literature and practice of monetary policy, but is gaining more attention recently. We look at how a decade of unconventional monetary policy (UMP) in Japan affected inequality among households using survey data. Our vector auto regression (VAR) results show that UMP widened income inequality, especially after 2008 when quantitative easing became more aggressive. This is largely due to the portfolio channel. To the best of our knowledge, this is the first study to empirically analyze the distributional impact of UMP. Japan’s extensive experience with UMP may hold important policy implications for other countries.

Keywords: Monetary Policy, Central Banking, Stabilization Policy, Inequality

JEL Classification: E52, E63, D63

Suggested Citation

Saiki, Ayako and Frost, Jon, How Does Unconventional Monetary Policy Affect Inequality? Evidence from Japan (May 8, 2014). De Nederlandsche Bank Working Paper No. 423, Available at SSRN: https://ssrn.com/abstract=2434509 or http://dx.doi.org/10.2139/ssrn.2434509

Ayako Saiki (Contact Author)

University of London - School of Oriental and African Studies (SOAS)

10 Thornhaugh Street
Russell Square
London, WC1H 0XG
United Kingdom

De Nederlandsche Bank - Monetary and Economic Policy Department

POBox 98
Amsterdam, 1000AB
Netherlands

Jon Frost

Bank for International Settlements ( email )

Basel
Switzerland

De Nederlandsche Bank ( email )

PO Box 98
1000 AB Amsterdam
Amsterdam, 1000 AB
Netherlands

University of Cambridge - Cambridge Centre for Alternative Finance ( email )

10 Trumpington Street
Cambridge, CB21QA
United Kingdom

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