The Distributional Impact of Monetary Policy Easing in the UK between 2008 and 2014

65 Pages Posted: 17 Apr 2018

See all articles by Alice Pugh

Alice Pugh

Bank of England

Philip Bunn

Bank of England

Chris Yeates

Bank of England

Date Written: March 27, 2018

Abstract

Monetary policy has the potential to affect income and wealth inequality in the short run. This has always been true, but given the unprecedented period of accommodative policy in a number of advanced economies including the UK over the past decade, it has become more important to understand the size and direction of these effects. We use panel data from the ONS Wealth and Assets Survey on households’ characteristics and balance sheet positions to estimate the distributional impacts of UK monetary policy between 2008 and 2014. Our results suggest that the overall effect of monetary policy on standard relative measures of income and wealth inequality has been small. Given the pre-existing disparities in income and wealth, we estimate that the impact on each household varied substantially across the income and wealth distributions in cash terms, but in percentage terms the effects were broadly similar. We estimate that households around retirement age gained the most from the support to wealth, but that support to incomes disproportionately benefited the young. Overall, our results illustrate the importance of taking a broad-based approach to studying the distributional impacts of monetary policy and of considering channels jointly rather than in isolation.

Keywords: Monetary policy, households, inequality, distributional effects

JEL Classification: D12, D31, E52, E58

Suggested Citation

Pugh, Alice and Bunn, Philip and Yeates, Chris, The Distributional Impact of Monetary Policy Easing in the UK between 2008 and 2014 (March 27, 2018). Bank of England Working Paper No. 720. Available at SSRN: https://ssrn.com/abstract=3156913 or http://dx.doi.org/10.2139/ssrn.3156913

Alice Pugh

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Philip Bunn (Contact Author)

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Chris Yeates

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
27
Abstract Views
234
PlumX Metrics