Research

Abstract

This paper shows that ECB monetary policy announcements can also trigger a credit sentiment shock, in addition to the well-studied monetary policy shocks and information effects. This additional dimension arises from the ECB’s assessment of euro-area credit and lending conditions, which is communicated alongside the rationale for the policy decision. I extend the methodology of Jarociński and Karadi (2020) to account for this channel. Estimates that incorporate this extra dimension yield impulse responses to ECB monetary policy shocks that are closer to theoretical predictions and more comparable to those found for other major central banks. Moreover, credit sentiment shocks triggered by monetary policy announcements exhibit pronounced asymmetries and nonlinearities.

Abstract

Previous literature has examined the distributional effects of Asset Purchase Programs (APPs) across multiple countries. However, empirical results often diverge—some studies find positive effects on inequality, while others find negative ones—suggesting that the impact of APPs may be country-specific. This paper investigates one potential driver of this heterogeneity: cross-country differences in portfolio composition. Specifically, it shows that the degree of dissimilarity in exposure to broad price increases triggered by APPs between the wealthiest households and the rest accounts for nearly 40\% of the variation in country-level estimates of APPs’ effects on wealth inequality. In countries with the largest exposure gaps, the peak increase in inequality is, on average, three times as large as the average of the rest of the countries. In contrast, in countries with smaller exposure gaps, the estimated effects suggest that APPs may even reduce wealth inequality.

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