EFFECTS OF ECB’S UNCONVENTIONAL MONETARY POLICY MEASURES ON INEQUALITY AND INCOME DISTRIBUTION

This paper analyzes the effects of unconventional monetary policy measures of the European Central Bank (ECB) on inequality and (re)distribution of income in selected euro area member states. The paper focuses on a empirical estimation of the effects of unconventional monetary policy measures by the ECB on selected macroeconomic and financial indicators that have implications for (re)distribution of income, as well as on the Gini coefficient as a commonly used measure of economic inequality. The empirical analysis is performed in two steps. In the first step ECB’s monetary policy shock is identified using sign restrictions in a structural vector autoregressive model (SVAR). In the second step, identified monetary policy shock is included in the country specific VARs. The results indicate that the ECB’s unconventional monetary policy increases stock prices more than wages in all analyzed countries. Assuming that wages make up a relatively larger share of disposable income in the lower-income vs high-income population, these results suggest that the ECB’s unconventional measures increase inequalities within countries. However, the analysis of the effect of the ECB’s monetary policy on the Gini coefficient neither confirms nor rejects this conclusion. The positive effect of the expansionary monetary shock on labor and capital incomes is quantitatively larger in the euro area periphery than in analyzed core euro area countries. Although such a result would imply that the ECB’s unconventional measures contribute to the reduction of core-periphery inequalities in the analyzed counties, we also present some evidence that contradicts this view.