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How does unconventional monetary policy affect inequality? Evidence from Japan

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  • Ayako Saiki
  • Jon Frost

Abstract

Inequality has been largely ignored in the literature and practice of monetary policy, but is gaining more attention recently. We look at how a decade of unconventional monetary policy (UMP) in Japan affected inequality among households using survey data. Our vector auto regression (VAR) results show that UMP widened income inequality, especially after 2008 when quantitative easing became more aggressive. This is largely due to the portfolio channel. To the best of our knowledge, this is the first study to empirically analyze the distributional impact of UMP. Japan's extensive experience with UMP may hold important policy implications for other countries.

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Bibliographic Info

Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 423.

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Date of creation: May 2014
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Handle: RePEc:dnb:dnbwpp:423

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Keywords: Monetary Policy; Central Banking; Stabilization Policy; Inequality;

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  1. Claudio Borio & Piti Disyatat, 2009. "Unconventional monetary policies: an appraisal," BIS Working Papers 292, Bank for International Settlements.
  2. Eswar S. Prasad, 2010. "Financial Sector Regulation and Reforms in Emerging Markets: An Overview," NBER Working Papers 16428, National Bureau of Economic Research, Inc.
  3. Stefania Albanesi, . "Inflation and Inequality," Working Papers 199, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  4. Andrés Erosa & Gustavo Ventura, 2000. "On Inflation as a Regressive Consumption Tax," UWO Department of Economics Working Papers 20001, University of Western Ontario, Department of Economics.
  5. Jeremy Lise & Nao Sudo & Michio Suzuki & Ken Yamada & Tomoaki Yamada, 2013. "Wage, Income and Consumption Inequality in Japan, 1981-2008: from Boom to Lost Decades," Working Papers 2013-011, Human Capital and Economic Opportunity Working Group.
  6. Matthias Doepke & Martin Schneider, 2006. "Inflation and the Redistribution of Nominal Wealth," Journal of Political Economy, University of Chicago Press, vol. 114(6), pages 1069-1097, December.
  7. N. Gregory Mankiw, 2013. "Defending the One Percent," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 21-34, Summer.
  8. Christiaan Pattipeilohy & Jan Willem van den End & Mostafa Tabbae & Jon Frost & Jakob de Haan, 2013. "Unconventional monetary policy of the ECB during the financial crisis: An assessment and new evidence," DNB Working Papers 381, Netherlands Central Bank, Research Department.
  9. Nicholas Rohde, 2008. "A comparison of inequality measurement techniques," Discussion Papers Series 377, School of Economics, University of Queensland, Australia.
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