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Monetary policy and wealth inequality over the great recession in the UK. An empirical analysis

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  • Mumtaz, Haroon
  • Theophilopoulou, Angeliki

Abstract

We use detailed micro information at household level from the Wealth and Assets Survey to construct measures of wealth inequality from 2006 to 2018 at the monthly frequency. We investigate the dynamic relationship between monetary policy and the evolution of wealth inequality measures. Our findings suggest that expansionary monetary policy shocks lead to an increase in wealth inequality and contributed significantly to its fluctuations. This effect is heterogenous across the wealth distribution with the monetary shock affecting the median household relative to the 10th and 20th percentile by a larger amount than the right tail. Our results suggest that the shock is transmitted through changes in net property and financial wealth.

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  • Mumtaz, Haroon & Theophilopoulou, Angeliki, 2020. "Monetary policy and wealth inequality over the great recession in the UK. An empirical analysis," European Economic Review, Elsevier, vol. 130(C).
    • Handle: RePEc:eee:eecrev:v:130:y:2020:i:c:s0014292120302282
    DOI: 10.1016/j.euroecorev.2020.103598
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    Cited by:

    1. Marlin Jason Fortuin & Gerhard Philip Maree Grebe & Patricia Lindelwa Makoni, 2022. "Wealth Inequality in South Africa—The Role of Government Policy," JRFM, MDPI, vol. 15(6), pages 1-11, May.
    2. Sangyup Choi & Jeeyeon Phi, 2022. "Impact of Uncertainty Shocks on Income and Wealth Inequality," Working papers 2022rwp-196, Yonsei University, Yonsei Economics Research Institute.
    3. Michele Cantarella & Andrea Neri & Giovanna Ranalli, 2021. "Mind the wealth gap: a new allocation method to match micro and macro statistics on household wealth," Questioni di Economia e Finanza (Occasional Papers) 646, Bank of Italy, Economic Research and International Relations Area.
    4. Haroon Mumtaz & Katerina Petrova, 2023. "Changing Impact of Shocks: A Time‐Varying Proxy SVAR Approach," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(2-3), pages 635-654, March.
    5. Davtyan, Karen, 2023. "Unconventional monetary policy and economic inequality," Economic Modelling, Elsevier, vol. 126(C).
    6. Bernd Hayo, 2023. "Does the ECB’s Monetary Policy Affect Personal Finances and Economic Inequality? A Household Perspective from Germany," MAGKS Papers on Economics 202023, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    7. Makram El-Shagi & Steven Yamarik, 2024. "The Effect of Monetary Policy Shocks on Income Inequality across US states," CFDS Discussion Paper Series 2024/4, Center for Financial Development and Stability at Henan University, Kaifeng, Henan, China.
    8. De Nora, Giorgia, 2023. "Factor-Augmented Vector Autoregression with narrative identification. An application to monetary policy in the US," Economics Letters, Elsevier, vol. 229(C).
    9. Hayo, Bernd, 2021. "Does Quantitative Easing Affect People’s Personal Financial Situation and Economic Inequality? The View of the German Population," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242331, Verein für Socialpolitik / German Economic Association.
    10. Bruns, Martin, 2021. "Proxy Vector Autoregressions in a Data-rich Environment," Journal of Economic Dynamics and Control, Elsevier, vol. 123(C).

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    More about this item

    Keywords

    Inequality; Wealth; FAVAR; Monetary policy shocks;
    All these keywords.

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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