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Wealth inequality and monetary policy

Author

Listed:
  • Dietrich Domanski
  • Michela Scatigna
  • Anna Zabai

Abstract

This feature explores the recent evolution of household wealth inequality in advanced economies by looking at valuation effects on household assets and liabilities. Using household survey data, we analyse the possible drivers of wealth inequality and the potential effect of monetary policy through its impact on interest rates and asset prices. Our simulation suggests that wealth inequality has risen since the Great Financial Crisis. While low interest rates and rising bond prices have had a negligible impact on wealth inequality, rising equity prices have been a key driver of inequality. A recovery in house prices has only partly offset this effect. Abstracting from general equilibrium effects on savings, borrowing and human wealth, this suggests that monetary policy may have added to inequality to the extent that it has boosted equity prices.

Suggested Citation

  • Dietrich Domanski & Michela Scatigna & Anna Zabai, 2016. "Wealth inequality and monetary policy," BIS Quarterly Review, Bank for International Settlements, March.
    • Handle: RePEc:bis:bisqtr:1603f
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    References listed on IDEAS

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    1. Adam, Klaus & Tzamourani, Panagiota, 2016. "Distributional consequences of asset price inflation in the Euro Area," European Economic Review, Elsevier, vol. 89(C), pages 172-192.
    2. John H. Rogers & Chiara Scotti & Jonathan H. Wright, 2014. "Evaluating Asset-Market Effects of Unconventional Monetary Policy: A Cross-Country Comparison," International Finance Discussion Papers 1101, Board of Governors of the Federal Reserve System (U.S.).
    3. Saez, Emmanuel & Zucman, Gabriel, 2014. "Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data," CEPR Discussion Papers 10227, C.E.P.R. Discussion Papers.
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