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Distributional consequences of asset price inflation in the Euro area

Author

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  • Adam, Klaus
  • Tzamourani, Panagiota

Abstract

We study the distributional consequences of housing price, bond price and equity price increases for Euro Area households using data from the Household Finance and Consumption Survey (HFCS). The capital gains from bond price and equity price increases turn out to be concentrated among relatively few households, while the median household strongly benefits from housing price increases. The capital gains from bond price increases (relative to household net wealth) do not correlate with household net wealth (or income). Bond price increases thus leave net wealth inequality largely unchanged. In contrast, equity price increases largely benefit the top end of the net wealth (and income) distribution, thus amplify net wealth inequality. Housing price increases display a hump shaped pattern over the net wealth distribution, with the poorest and richest households benefitting least. With regard to the latter finding there exists considerable heterogeneity across Euro Area countries.

Suggested Citation

  • Adam, Klaus & Tzamourani, Panagiota, 2015. "Distributional consequences of asset price inflation in the Euro area," Working Papers 15-15, University of Mannheim, Department of Economics.
  • Handle: RePEc:mnh:wpaper:39697
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    References listed on IDEAS

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    1. Albanesi, Stefania, 2007. "Inflation and inequality," Journal of Monetary Economics, Elsevier, vol. 54(4), pages 1088-1114, May.
    2. 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.
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    5. Meh, Césaire A. & Ríos-Rull, José-Víctor & Terajima, Yaz, 2010. "Aggregate and welfare effects of redistribution of wealth under inflation and price-level targeting," Journal of Monetary Economics, Elsevier, vol. 57(6), pages 637-652, September.
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    7. Matthias Doepke, "undated". "Inflation as a Redistribution Shock: Effects on Aggregates and Welfare," UCLA Economics Online Papers 412, UCLA Department of Economics.
    8. Nils Gornemann & Keith Kuester & Makoto Nakajima, 2016. "Doves for the Rich, Hawks for the Poor? Distributional Consequences of Monetary Policy," International Finance Discussion Papers 1167, Board of Governors of the Federal Reserve System (U.S.).
    9. Klaus Adam & Junyi Zhu, 2016. "Price-Level Changes And The Redistribution Of Nominal Wealth Across The Euro Area," Journal of the European Economic Association, European Economic Association, vol. 14(4), pages 871-906, August.
    10. Olivier Coibion & Yuriy Gorodnichenko & Lorenz Kueng & John Silvia, 2012. "Innocent Bystanders? Monetary Policy and Inequality in the U.S," NBER Working Papers 18170, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Davide Furceri & Prakash Loungani & Aleksandra Zdzienicka, 2016. "The Effects of Monetary Policy Shocks on Inequality," IMF Working Papers 16/245, International Monetary Fund.
    2. repec:bfr:rueban:2018:55 is not listed on IDEAS
    3. repec:eee:jimfin:v:85:y:2018:i:c:p:187-214 is not listed on IDEAS
    4. Casiraghi, Marco & Gaiotti, Eugenio & Rodano, Lisa & Secchi, Alessandro, 2018. "A “reverse Robin Hood”? The distributional implications of non-standard monetary policy for Italian households," Journal of International Money and Finance, Elsevier, vol. 85(C), pages 215-235.
    5. repec:prg:jnlpep:v:preprint:id:630:p:1-13 is not listed on IDEAS
    6. Dietrich Domanski & Michela Scatigna & Anna Zabai, 2016. "Wealth inequality and monetary policy," BIS Quarterly Review, Bank for International Settlements, March.
    7. repec:eee:jimfin:v:85:y:2018:i:c:p:168-186 is not listed on IDEAS
    8. Amaral, Pedro S., 2017. "Monetary Policy and Inequality," Economic Commentary, Federal Reserve Bank of Cleveland, issue January.

    More about this item

    Keywords

    asset price inflation ; wealth redistribution;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • 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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