A 'Reverse Robin Hood'? The Distributional Implications of Non-Standard Monetary Policy for Italian Households

Abstract

We study empirically the distributional implications of a non-standard monetary policy expansion, considering the measures implemented by the Eurosystem in 2011-2013 and exploiting a rich micro dataset on Italian households' income and wealth, in order to take contemporaneously into account a number of income-and wealth-related channels. Our results do not support the claim that an unconventional monetary loosening acts as a "reverse Robin Hood". Larger benefits accrue to households at the bottom of the income scale, as the effects via the stimulus to economic activity and employment outweigh those via financial variables. The response of net wealth is U-shaped: less wealthy households take advantage of their leveraged positions, wealthier households of their larger share of financial assets. Overall, the effects on inequality are negligible. The results also suggest that the risk of an "expropriation of savers" is not likely to materialize, as the decrease in the remuneration of savings is compensated by support to labor income and by capital gains.

Monetary Policy and Inequality

“…This could offset the increase in income inequality due to lower interest rates in many euro area countries examined and the United Kingdom and reduce income inequality in Canada and the United States by substantially more than as a result of changes in net interest income alone. This is consistent with the findings for Italy (Casiraghi et al, 2016). Monetary policy easing in the euro area is estimated to have reduced income inequality for Italian households via its stimulus to economic activity and employment by more than it is estimated to have increased income inequality via interest income and debt servicing costs.…”

Monetary policy and inequality: Financial channels

“…This is consistent with the findings for Italy. Casiraghi, Gaiotti, Rodano, and Secchi (2016) show that monetary policy easing in the euro area reduced income inequality for Italian households via its stimulus to economic activity, and employment by more than it increased income inequality via interest income and debt servicing costs.…”

Central Bank Policies and Income and Wealth Inequality: A Survey

“…13 Quarterly or monthly microdata would allow examining distributional effects of monetary policy at a higher frequency over a long horizon. Longitudinal household surveys have been used to study the impact of monetary policy on inequality, in the USA (Doepke and Schneider, 2006;Montecino and Epstein, 2015;Cloyne et al, 2016, Coibion et al, 2017, the UK Theophilopoulou, 2015, 2017;Cloyne et al, 2016;Bunn et al, 2018), Japan (Saiki and Frost, 2014;Inui et al, 2017), and Italy (Casiraghi et al, 2018). For other countries, continuous higher frequency household surveys are rarely available or are of poor quality.…”

“…While such approaches reduce measurement bias, they may underestimate the distributional effects of monetary policy due to excluding the richest households with a relatively large share of income. 14 Casiraghi et al (2018) correct the household survey bias due to underreporting and missing responses by using adjusted income and asset data from other sources.…”

“…However, this approach does not offer a causal analysis of the effects of QE on inequality. Casiraghi et al (2018) separate the effects of conventional and unconventional monetary policy by analyzing different, mutually exclusive scenarios of implemented policy instruments.…”