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Monetary Policy Shocks and their Effects across the Wealth Distribution: Evidence from new European data

Author

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  • Cima, Simone

    (Central Bank of Ireland and Department of Economics, Trinity College Dublin.)

  • Moreno, Marco

    (Central Bank of Ireland and Department of Economics, Trinity College Dublin.)

Abstract

We use new data on the distribution of wealth in the euro area and employ panel local projections to estimate the different impact of ECB monetary policy shocks on households across the wealth distribution. We look at how policy affects the value of their assets, the composition of their balance sheets, their investment decisions, and overall wealth inequality. We find that in response to a contractionary shock, poorer households display a substantial decline in their assets and in their overall net wealth. Conversely, the total wealth of the very richest is not significantly affected. This different response leads to a moderate increase in overall wealth inequality. We further perform a decomposition of asset movements caused by the shock, isolating the effect of revaluations and of household investment. We observe that the response of household wealth due to a monetary policy shock occurs primarily through revaluation effects.

Suggested Citation

  • Cima, Simone & Moreno, Marco, 2025. "Monetary Policy Shocks and their Effects across the Wealth Distribution: Evidence from new European data," Research Technical Papers 6/RT/25, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:6/rt/25
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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • 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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