Wealth Inequality and Monetary Policy

20 Pages Posted: 9 Mar 2016

See all articles by Dietrich Domanski

Dietrich Domanski

Bank for International Settlements (BIS)

Michela Scatigna

Bank for International Settlements (BIS)

Anna Zabai

Bank for International Settlements (BIS)

Date Written: March 6, 2016

Abstract

This feature explores the recent evolution of household wealth inequality in advanced economies by looking at valuation effects on household assets and liabilities. Using household survey data, we analyse the possible drivers of wealth inequality and the potential effect of monetary policy through its impact on interest rates and asset prices. Our simulation suggests that wealth inequality has risen since the Great Financial Crisis. While low interest rates and rising bond prices have had a negligible impact on wealth inequality, rising equity prices have been a key driver of inequality. A recovery in house prices has only partly offset this effect. Abstracting from general equilibrium effects on savings, borrowing and human wealth, this suggests that monetary policy may have added to inequality to the extent that it has boosted equity prices.

JEL Classification: D31, E52

Suggested Citation

Domanski, Dietrich and Scatigna, Michela and Zabai, Anna, Wealth Inequality and Monetary Policy (March 6, 2016). BIS Quarterly Review March 2016. Available at SSRN: https://ssrn.com/abstract=2744862

Dietrich Domanski (Contact Author)

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Michela Scatigna

Bank for International Settlements (BIS) ( email )

Basel, 4002
Switzerland

Anna Zabai

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

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