Tag Archives: Asset

Redistribution From Unexpected Deflation in the Euro Area

In the JEEA 14(4) (August 2016) Klaus Adam and Junyi Zhu argue that

unexpected price-level movements generate sizable wealth redistribution in the Euro Area (EA) … The EA as a whole is a net loser of unexpected price-level decreases, with Italy, Greece, Portugal, and Spain losing most in per capita terms, and Belgium and Malta being net winners. Governments are net losers of deflation, while the household (HH) sector is a net winner … HHs in Belgium, Ireland, Malta, and Germany experience the biggest per capita gains, while HHs in Finland and Spain turn out to be net losers. … relatively young middle class HHs are net losers of deflation, while older and richer HHs are winners. … wealth inequality in the EA increases with unexpected deflation, although in some countries (Austria, Germany, and Malta) inequality decreases due to the presence of relatively few young borrowing HHs. … HHs in high-inflation EA countries hold… systematically lower nominal exposures.

The table reports the estimated effects of a one-time unexpected change in the general price level by 10% (expressed either in thousand EUR per capita, or as a share of GDP); a positive sign indicates a gain from deflation.

 Government
(1000 EUR p.c.)
Households
(1000 EUR p.c.)
ROW
(1000 EUR p.c.)
Government
(share of GDP)
Households
(share of GDP)
ROW
(share of GDP)
Euro Area−18.67.810.8−0.730.300.42
Austria−21.711.610.1−0.700.370.32
Belgium−27.640.8−13.2−0.931.37−0.44
Cyprus−9.9−7.217.0−0.52−0.380.89
Finland−3.0−8.411.3−0.10−0.270.37
France−22.310.611.7−0.810.390.43
Germany−17.415.32.2−0.600.530.08
Greece−22.9−1.224.1−1.34−0.071.41
Ireland−19.221.8−2.6−0.540.61−0.07
Italy−23.28.115.1−0.990.350.64
Luxembourg22.712.0−34.70.350.18−0.53
Malta−8.320.1−11.8−0.631.52−0.89
Netherlands−16.5−9.525.9−0.50−0.290.78
Portugal−13.1−0.213.3−0.88−0.010.89
Slovakia−4.82.22.6−0.540.240.29
Slovenia−8.62.95.7−0.560.190.37
Spain−12.4−6.719.1−0.60−0.320.93