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Does the ECB's monetary policy affect personal finances and economic inequality? A household perspective from Germany

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  • Hayo, Bernd

Abstract

Despite a growing academic literature on the distributional effects of monetary policy (MP), little is known about how laypersons perceive the effects of MP on their own economic situation and national economic inequality. This study examines laypersons' perceptions in Germany of the impact of the ECB's MP on (i) their personal economic situation and (ii) national economic inequality, using representative survey data collected in 2018. I review the existing academic literature, which identifies various characteristics of individuals that could potentially render them susceptible to the effects of monetary policy, such as savings, wealth, home ownership, debt, unemployment, or age. I then investigate whether these characteristics align with layperson's perceptions. Ordered logit analysis shows that, contrary to the economic literature, most variables - with the exception of 'savers' - appear to be irrelevant to laypersons' perceptions. Instead, factors such as objective knowledge of monetary policy, trust in the ECB, party affiliation and residence in East Germany emerge as significant factors.

Suggested Citation

  • Hayo, Bernd, 2023. "Does the ECB's monetary policy affect personal finances and economic inequality? A household perspective from Germany," Economic Modelling, Elsevier, vol. 129(C).
    • Handle: RePEc:eee:ecmode:v:129:y:2023:i:c:s0264999323003681
    DOI: 10.1016/j.econmod.2023.106556
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    More about this item

    Keywords

    Economic inequality; Income distribution; Monetary policy; ECB; Population survey; Germany;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • Z1 - Other Special Topics - - Cultural Economics

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