Conventional and unconventional monetary policy vs. households income distribution: An empirical analysis for the Euro Area

Guerello, Chiara

doi:10.1016/j.jimonfin.2017.11.005

Cited by 70 publications

(79 citation statements)

References 21 publications

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“…It is used to examine the dynamic reactions of income and wealth inequality to a monetary policy shock. For this purpose, studies estimate VAR models and construct impulse responses of inequality to a monetary policy shock (e.g., Saiki and Frost, 2014;Theophilopoulou, 2015, 2017;Guerello, 2018) or use local projections to produce impulse responses (Coibion et al, 2017, Inui et al 2017Furceri et al, 2018). 16 This approach is straightforward; however, it is not equipped for studying multiple distributional channels of monetary policy, as examined in theoretical models.…”

Section: Methodsological Challengesmentioning

confidence: 99%

“…Conventional monetary policy is commonly proxied by short‐term or policy interest rates (e.g., Coibion et al ., ; Mumtaz and Theophilopolou, ; Furceri et al ., ). Measures used for unconventional monetary policy are central bank assets (Saiki and Frost, ; Guerello, ), government bond spreads (Mumtaz and Theophilopolou, ), or a shadow rate (Inui et al ., ) . The analysis of the distributional effects of unconventional policy faces an identification problem.…”

Section: Monetary Policy and Inequality: Empirical Evidencementioning

confidence: 99%

“…It is used to examine the dynamic reactions of income and wealth inequality to a monetary policy shock. For this purpose, studies estimate VAR models and construct impulse responses of inequality to a monetary policy shock (e.g., Saiki and Frost, ; Mumtaz and Theophilopoulou, , ; Guerello, ) or use local projections to produce impulse responses (Coibion et al ., , Inui et al . ; Furceri et al ., ) .…”

Section: Monetary Policy and Inequality: Empirical Evidencementioning

confidence: 99%

“…Several papers find that contractionary monetary policy, by raising interest rates, increases income and earnings inequality in the USA (Coibion et al ., ; Aye et al ., ), the UK (Mumtaz and Theophilopoulou, , ), the euro area (Guerello, ; Samarina and Nguyen, ), and in a panel of advanced and emerging countries (Furceri et al ., ). Monetary contraction depresses economic activity, employment, and wages, notably hurting low‐income households for which labor earnings constitute the main income source.…”

Section: Monetary Policy and Inequality: Empirical Evidencementioning

confidence: 99%

“…In addition, higher wages benefit poor and middle‐class households, as they are more sensitive to changes in labor earnings than the rich. Supporting evidence for this channel is found for the USA (Bivens, ), Italy (Casiraghi et al ., ), and the euro area (Guerello, ; Lenza and Slačálek, ). In contrast, the income composition channel suggests that unconventional policy increases income inequality: by boosting asset prices, capital income of the rich increase, and income inequality rises .…”

Section: Monetary Policy and Inequality: Empirical Evidencementioning

confidence: 99%

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Central Bank Policies and Income and Wealth Inequality: A Survey

Colciago

Samarina

Haan

2019

Journal of Economic Surveys

137

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This paper reviews recent research on the relationship between central bank policies and inequality. A new paradigm which integrates sticky‐prices, incomplete markets, and heterogeneity among households is emerging, which allows for the joint study of how inequality shapes macroeconomic aggregates and how macroeconomic shocks and policies affect inequality. The new paradigm features multiple distributional channels of monetary policy. Most empirical studies, however, analyze each potential channel of redistribution in isolation. Our review suggests that empirical research on the effects of conventional monetary policy on income and wealth inequality yields mixed findings, although there seems to be a consensus that higher inflation, at least above some threshold, increases inequality. In contrast to common wisdom, conclusions concerning the impact of unconventional monetary policies on inequality are also not clear cut. To better understand policy effects on inequality, future research should focus on the estimation of General Equilibrium models with heterogeneous agents.

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Section: Methodsological Challengesmentioning

confidence: 99%

Section: Monetary Policy and Inequality: Empirical Evidencementioning

confidence: 99%

“…It is used to examine the dynamic reactions of income and wealth inequality to a monetary policy shock. For this purpose, studies estimate VAR models and construct impulse responses of inequality to a monetary policy shock (e.g., Saiki and Frost, ; Mumtaz and Theophilopoulou, , ; Guerello, ) or use local projections to produce impulse responses (Coibion et al ., , Inui et al . ; Furceri et al ., ) .…”

Section: Monetary Policy and Inequality: Empirical Evidencementioning

confidence: 99%

Section: Monetary Policy and Inequality: Empirical Evidencementioning

confidence: 99%

Section: Monetary Policy and Inequality: Empirical Evidencementioning

confidence: 99%

See 3 more Smart Citations

Central Bank Policies and Income and Wealth Inequality: A Survey

Colciago

Samarina

Haan

2019

Journal of Economic Surveys

137

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Income inequality and monetary policy in the euro area

Creel

Herradi

2022

Int. J Fin Econ

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This paper examines the distributional implications of monetary policy, either standard, non-standard or both, on income inequality in 10 Euro Area countries over the period 2000-2015. We use three different indicators of income inequality in a Panel VAR setting in order to estimate IRFs of inequality to a monetar y policy shock. The identification of monetary shocks follows a one-step procedure and relies only on country-specific determinants of income distribution. Results suggest that: (i) the distributional effects of ECB's monetary policy have been modest and (ii) mainly driven in times of conventional monetary policy measures, especially in countries with a high level of market inequalities, while, overall, (iii) standard and non-standard monetary policies do not significantly differ in terms of impact on income inequality. Results are robust to alternative data sources either for income distri bution or for non-standard monetary policies.

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How does monetary policy affect income and wealth inequality? Evidence from quantitative easing in the euro area

Lenza,

Slacalek

2024

J of Applied Econometrics

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SummaryThis 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.

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Conventional and unconventional monetary policy vs. households income distribution: An empirical analysis for the Euro Area

Cited by 70 publications

References 21 publications

Central Bank Policies and Income and Wealth Inequality: A Survey

Central Bank Policies and Income and Wealth Inequality: A Survey

Income inequality and monetary policy in the euro area

How does monetary policy affect income and wealth inequality? Evidence from quantitative easing in the euro area

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