Research

Abstract

Previous estimates of broad ECB monetary policy shocks produce comparatively muted responses in stock prices and other financial variables. This paper shows that identifying a broad ECB monetary policy shock using only monetary policy and central bank information components may yield a measure partly contaminated by an additional dimension of ECB communication. I extend the high-frequency identification framework to include a third structural shock. Separating this component produces a cleaner measure of the broad ECB policy stance whose financial effects are more consistent with the evidence from other major central banks. The additional component combines fragmentation-related variation previously documented in the literature with a distinct credit-market sentiment shock. After removing the fragmentation component, narrative and text-based evidence supports its interpretation as credit sentiment induced by ECB announcements. Bayesian VARX estimates show that the effects of the fragmentation-adjusted shock are concentrated in financial conditions and driven mainly by adverse realizations. The findings highlight the importance of accounting for credit-related communication when identifying the financial effects of ECB monetary policy.

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Abstract

This paper examines the impact of Quantitative Easing on wealth inequality in the Euro Area. I show that the heterogeneous findings in the literature can be explained by cross-country differences in portfolio composition across the wealth distribution. I construct an exposure gap measure capturing how much more wealthier households benefit from asset price increases induced by QE relative to lower wealth groups. Using local projections, I find that Asset Purchase Programs (APPs) increase wealth inequality on average, with effects peaking after four quarters and lasting around two years. However, this average masks substantial heterogeneity. The inequality effect is significantly larger in countries with higher exposure gaps, while in countries with low exposure gaps, APPs reduce inequality for up to four years. These findings highlight that the distributional effects of QE are not uniform but depend on the underlying portfolio structure of the economy. The results are robust to controlling for alternative financial and structural channels.

🗐 Slides