The Impact of Monetary Policy on Inequality in the UK. An Empirical Analysis

Mumtaz, H. and Theophilopoulou, A. 2017. The Impact of Monetary Policy on Inequality in the UK. An Empirical Analysis. European Economic Review. 98, pp. 410-423.

TitleThe Impact of Monetary Policy on Inequality in the UK. An Empirical Analysis
AuthorsMumtaz, H. and Theophilopoulou, A.
Abstract

The UK has experienced a dramatic increase in earnings and income inequality over the past four decades. We use detailed micro level information to construct quarterly historical measures of inequality from 1969 to 2012. We investigate whether monetary policy shocks played a role in explaining this increase in inequality. We find that contractionary monetary policy shocks lead to an increase in earnings, income and consumption inequality and contribute to their fluctuation. The response of income and consumption at different quantiles suggests that contractionary policy has a larger negative effect on low income households and those that consume the least when compared to those at the top of the distribution. Our evidence also suggests that the policy of quantitative easing may have contributed to the increase in inequality over the Great Recession.

KeywordsInequality, Earnings, Income, SVAR, Monetary Policy Shocks
JournalEuropean Economic Review
Journal citation98, pp. 410-423
ISSN0014-2921
Year2017
PublisherElsevier
Digital Object Identifier (DOI)doi:10.1016/j.euroecorev.2017.07.008
Web address (URL)http://www.sciencedirect.com/science/article/pii/S0014292117301332
Publication dates
Published online01 Aug 2017
Published01 Aug 2017
Published in printSep 2017
LicenseCC BY-NC-ND 4.0

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