Unconventional Monetary Policy and Wealth Inequalities in Great Britain

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 ho...

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Bibliographic Details
Published in:Oxford bulletin of economics and statistics 2021-02, Vol.83 (1), p.115-175
Main Authors: Evgenidis, Anastasios, Fasianos, Apostolos
Format: Article
Language:English
Subjects:
Analysis
Assets
Banking
Central banks
Distribution (Economics)
Economic crisis
Economic inequality
Households
Inequality
Inflation
International finance
Monetary policy
Personal income
Redistribution
Time series
Wealth
Wealth distribution
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Summary: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.
ISSN:0305-9049
1468-0084
DOI:10.1111/obes.12397