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The distributional impact of monetary policy easing in the UK between 2008 and 2014

Author

Listed:
  • Bunn, Philip

    (Bank of England)

  • Pugh, Alice

    (Bank of England)

  • Yeates, Chris

    (Bank of England)

Abstract

Monetary policy has the potential to affect income and wealth inequality in the short run. This has always been true, but given the unprecedented period of accommodative policy in a number of advanced economies including the UK over the past decade, it has become more important to understand the size and direction of these effects. We use panel data from the ONS Wealth and Assets Survey on households’ characteristics and balance sheet positions to estimate the distributional impacts of UK monetary policy between 2008 and 2014. Our results suggest that the overall effect of monetary policy on standard relative measures of income and wealth inequality has been small. Given the pre-existing disparities in income and wealth, we estimate that the impact on each household varied substantially across the income and wealth distributions in cash terms, but in percentage terms the effects were broadly similar. We estimate that households around retirement age gained the most from the support to wealth, but that support to incomes disproportionately benefited the young. Overall, our results illustrate the importance of taking a broad-based approach to studying the distributional impacts of monetary policy and of considering channels jointly rather than in isolation.

Suggested Citation

  • Bunn, Philip & Pugh, Alice & Yeates, Chris, 2018. "The distributional impact of monetary policy easing in the UK between 2008 and 2014," Bank of England working papers 720, Bank of England.
    • Handle: RePEc:boe:boeewp:0720
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Monetary policy; households; inequality; distributional effects;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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