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How does unconventional monetary policy affect inequality? Evidence from Japan

  • Ayako Saiki
  • Jon Frost

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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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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Web page: http://www.dnb.nl/en/

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  1. Eswar S. Prasad, 2010. "Financial Sector Regulation and Reforms in Emerging Markets: An Overview," NBER Working Papers 16428, National Bureau of Economic Research, Inc.
  2. Albanesi, Stefania, 2007. "Inflation and inequality," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1088-1114, May.
  3. Erosa, Andres & Ventura, Gustavo, 2002. "On inflation as a regressive consumption tax," Journal of Monetary Economics, Elsevier, vol. 49(4), pages 761-795, May.
  4. Peter Skott, 2011. "Increasing inequality and financial instability," UMASS Amherst Economics Working Papers 2011-20, University of Massachusetts Amherst, Department of Economics.
  5. Nicholas Rohde, 2008. "A comparison of inequality measurement techniques," Discussion Papers Series 377, School of Economics, University of Queensland, Australia.
  6. Claudio Borio & Piti Disyatat, 2009. "Unconventional monetary policies: an appraisal," BIS Working Papers 292, Bank for International Settlements.
  7. 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.
  8. Jeremy Lise & Nao Sudo & Michio Suzuki & Ken Yamada & Tomoaki Yamada, 2014. "Wage, Income and Consumption Inequality in Japan, 1981-2008: from Boom to Lost Decades," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(4), pages 582-612, October.
  9. N. Gregory Mankiw, 2013. "Defending the One Percent," Journal of Economic Perspectives, American Economic Association, vol. 27(3), pages 21-34, Summer.
  10. Jakob de Haan & Willem van den End & Jon Frost & Christiaan Pattipeilohy & Mostafa Tabbae, 2013. "Unconventional Monetary Policy of the ECB during the Financial Crisis: An Assessment and New Evidence," SUERF 50th Anniversary Volume Chapters, SUERF - The European Money and Finance Forum.
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