Monetary Policy and Wealth Inequalities: Assessing the role of unconventional policies for a decade of household data

Abstract: This paper explores whether unconventional monetary policy operations have redistributive effects on household wealth. Drawing on household balance sheet data from the Wealth and Asset Survey, we construct monthly time series indicators on the distribution of different asset types held by British households for the period that the monetary policy switched as the policy rate reached the zero lower bound (2006-2016). Using this series, we estimate the response of wealth inequalities on monetary policy, taking into account the effect of unconventional policies conducted by the Bank of England in response to the Global Financial Crisis. Our evidence reveals that unconventional monetary policy shocks have significant effects on wealth inequality: an expansionary monetary policy in the form of asset purchases raises wealth inequality across households, as measured by their Gini coefficients of net wealth, housing wealth, and financial wealth. The evidence of our analysis helps to raise awareness of central bankers about the redistributive effects of their monetary policy decisions.