The Effects of Quantitative Easing on Wealth Inequality in Great Britain

Abstract: In this paper, wealth development in Great Britain is observed from 2006 to 2014 as well as the potential correlation between quantitative easing and this development. This, in order to analyse the implications of such a policy on wealth inequality. A database containing information on wealth at the household level is used to carry out the study. The analysis of two different inequality measures is first conducted as to display the trend in the development of wealth inequality during this period of time. Then, a difference-in-differences model is built to estimate to what extent quantitative easing has affected the wealth of the different economic classes in Great Britain, thus showing if it has had an effect on wealth inequality. Our findings indicate that wealth inequality has increased between 2006 and 2014. Moreover, we find that quantitative easing has explanatory power for this increase. The results suggest that it is mainly explained by the middle classes gaining disproportionally from quantitative easing compared with the lower class.