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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.

Suggested Citation

  • 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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    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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