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

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.

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