We analyze the link between financial development and income inequality for a broad unbalanced dataset of up to 138 developed and developing countries over the years 1960 to 2008. Using credit-to-GDP as a measure of financial development, our results reject theoretical models predicting a negative impact of financial development on income inequality measured by the Gini coefficient. Controlling for country fixed effects and GDP per capita, we find that financial development has a positive effect on income inequality. These results are robust to different measures of financial development, econometric specifications, and control variables. JEL-Code: O150, O160.

Using monthly post-1995 Japanese data we propose a new sign-restriction based approach to identify monetary policy shocks when the economy is at the zero-lower bound. The identifying restrictions are thoroughly grounded in liquidity trap theory. Our results show that a quantitative easing shock can lead to a significant but temporary rise in industrial production. The effect on inflation, however, is not significantly different from zero. Our results are robust to different specifications, in particular to the further identification of aggregate demand and supply shocks under liquidity trap conditions. Accordingly, our results imply that while the Japanese Quantitative Easing experiment was successful in stimulating economic activity in the shortrun, it did not lead to any increase in the inflation rate. We believe these results are interesting not only for the Japanese economy, but also for other advanced economies, such as the U.S., where monetary policy is constrained by the ZLB.

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This article examines the impact of macroeconomic news announcements on bond market expectations, as measured by option-implied probability distributions of future bond returns. The results indicate that expected bond market volatilities increase in response to higher-than-expected inflation and unemployment announcements. Furthermore, the asymmetries in bond market expectations are found to be affected mostly by surprises in inflation and economic production figures. In particular, it is found that higher-than-expected inflation announcements cause optionimplied bond return distributions to become more negatively skewed or less positively skewed, implying a shift in market participants' perceptions toward future increases in interest rates. Finally, the results indicate that market expectations of future extreme movements in bond prices are virtually unaffected by macroeconomic news releases. Some evidence isThe authors gratefully acknowledge helpful comments and suggestions by Peter Locke, Magnus Andersson, and an anonymous referee.

We examine the effects of the Asset Purchase Programme (APP) gradually introduced by the European Central Bank from September 2014 onwards. Studying the short-term reaction of financial markets after APP press releases, we analyse the development of bond yields and spreads around these releases. More precisely, we try to estimate different asset price channels by quantifying the cumulative decrease of spreads and by running event regressions for several Euro Area countries. Focusing on the signalling channel, measured by the OIS rate, and the portfolio rebalancing channel, proxied by the conditional bond-OIS spread, we find that the effects in yield and spread reduction were most pronounced for the initial announcement on the Public Sector Purchase Programme (PSPP) but declined afterwards for additional announcements. Possible explanations for this are the declining degree to which the ECB surprised markets and the increasingly burdensome institutional setup of the APP. While yield reductions were larger for periphery countries' than for core countries' bonds, our evidence suggests that this stronger reduction is mostly due to a decreasing risk component of southern bonds. In fact, once controlling for this implicit credit risk reduction we find rather mild effects from portfolio rebalancing for all countries.