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

By Haroon Mumtaz, Angeliki Theophilopoulou. 2017

242 citations recorded by the source corpus.

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.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/ea652d731981366c1f89c7a210a6198c30013b75

How researchers see this paper

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In Accounting

1. M. Lenza
2. Jiří Slačálek
3. Ricardo M. Sousa
4. Frank Smets
5. Marek Jarociński

In Economics and Econometrics

1. Jiří Slačálek
2. M. Lenza
3. Marek Jarociński
4. Ricardo M. Sousa
5. Frank Smets

Citations in the corpus

• CENTRAL BANK POLICIES AND INCOME AND WEALTH INEQUALITY: A SURVEY (2019, unknown): “For instance, Mumtaz and Theophilopoulou (2017) conduct a no-QE counterfactual experiment in a VAR with alternative paths for the long-term interest spread and compare inequality forecasts under “policy” versus “no-policy” scenarios.”
• How Does Monetary Policy Affect Income and Wealth Inequality? Evidence from Quantitative Easing in the Euro Area (2018, background): “A few papers follow the approach of Coibion et al. (2017) to assess the impact of standard policy on income inequality in other countries, notably Mumtaz and Theophilopoulou (2017) for the UK, Guerello (2018) for the euro area, Amberg et al. (2022) and Coglianese et al. (2021) for Sweden, Andersen…”