Unconventional Monetary Policy and Wealth Inequalities in Great Britain

69 Pages Posted: 8 May 2020

See all articles by Anastasios Evgenidis

Anastasios Evgenidis

affiliation not provided to SSRN

Apostolos Fasianos

Brunel University London - Department of Economics and Finance

Date Written: April 2020

Abstract

This paper explores whether unconventional monetary policy operations have redistributive effects on household wealth. Drawing on household balance sheet data from the Wealth and Asset Survey, we construct monthly time series indicators on the distribution of different asset types held by British households for the period that the monetary policy switched, as the policy rate reached the zero-lower bound. Using this series, we estimate the response of wealth inequalities on monetary policy, taking into account the effect of unconventional policies conducted by the Bank of England in response to the Global Financial Crisis. Our evidence reveals that

unconventional monetary policy shocks have significant and lingering effects on wealth inequality: the shock raises wealth inequality across households, as measured by their Gini coefficients, percentile shares, and other standard inequality indicators. Additionally, we explore the effects of different transmission channels simultaneously. We find that the portfolio rebalancing channel and house price effects widen the wealth gap, outweighing the counterbalancing impact of

the savings redistribution and inflation channels. The findings of our analysis help to raise awareness of central bankers about the redistributive effects of their monetary policy decisions.

Keywords: Household portfolios, monetary policy, Quantitative easing, survey data, VAR, Wealth Inequality

JEL Classification: D31, E21, E52, H31

Suggested Citation

Evgenidis, Anastasios and Fasianos, Apostolos, Unconventional Monetary Policy and Wealth Inequalities in Great Britain (April 2020). CEPR Discussion Paper No. DP14656, Available at SSRN: https://ssrn.com/abstract=3594288

Anastasios Evgenidis (Contact Author)

affiliation not provided to SSRN

Apostolos Fasianos

Brunel University London - Department of Economics and Finance ( email )

Kingston Lane
Uxbridge, Middlesex UB8 3PH
United Kingdom

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