In a Staff Working Paper, the Bank of England’s Philip Bunn, Alice Pugh, and Chris Yeates discuss how monetary policy easing following the financial crisis affected income and wealth of different age groups.
The authors analyze survey panel data (ONS Wealth and Assets Survey) on households’ characteristics and balance sheet positions. They argue that
the overall effect of monetary policy on standard relative measures of income and wealth inequality has been small. Given the pre-existing disparities in income and wealth, we estimate that the impact on each household varied substantially across the income and wealth distributions in cash terms, but in percentage terms the effects were broadly similar. We estimate that households around retirement age gained the most from the support to wealth, but that support to incomes disproportionately benefited the young. Overall, our results illustrate the importance of taking a broad-based approach to studying the distributional impacts of monetary policy and of considering channels jointly rather than in isolation.
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.
The ECB has published the results of the Eurosystem’s first Household Finance and Consumption Survey. Some results:
About 60% of households in the euro area own their main residence—with or without a mortgage. About 11% own a business, and 76% own vehicles.
97% of households own sight deposits or savings accounts. Some (33%) hold voluntary private pensions or life insurance and few (15%) own other financial assets. Only a quarter of households in the top income quintile holds mutual funds; also, a quarter of households in the top income quintile holds publicly traded shares.
23% of households have mortgage debt and 29% have non-mortgage debt. Conditional on having debt, the median value is Euro 68400 and Euro 5000, respectively.
Here are the mean and median net wealth statistics by country and socioeconomic characteristic.