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ECB Research Says Stimulus Didn’t Favor the Rich
World Economy

ECB Research Says Stimulus Didn’t Favor the Rich

New research published by the European Central Bank pushes back against criticism leveled at its €2.4 trillion ($2.8 trillion) stimulus program, indicating it did not increase inequality and helped boost poorer households’ income by putting people back to work.
The arguments in the paper released Wednesday help counter accusations, particularly from German politicians and news media, that the stimulus program hurt savers by depressing returns and benefited financially wobbly southern European governments such as Italy’s through lower borrowing costs, AP reported.
A headline in the Bild newspaper in December 2015, a few months after the program started, read: “We’ll Never Get Savings Interest Again.”
The ECB research—compiled by five economists from the central bank and one outside author—found that pain in one area could be compensated by stimulus gains in other areas, and that employment and wage gains benefited people across all income categories—in Germany as well as in Italy.
“Monetary policy in recent years benefited most households and did not contribute to an increase in wealth, income, or consumption inequality,” they wrote.
The report does not represent an official stance by the Frankfurt-based bank, which conducts monetary policy for the 19 countries that use the euro currency. The bank makes those policies clear in statements after its regular meetings and in news conferences held by ECB President Mario Draghi.
The researchers sought to measure the total effect of the stimulus program across different aspects of people’s pocketbooks: house prices, mortgage payments, rise or fall in investment holdings, wages, and interest on savings.
The research found that direct and obvious losses—such as a bank statement showing zero returns on savings due to low interest rate policy—were often offset by indirect benefits. That could be from people returning to work, as the stimulus policy lifts demand across the economy.
The ECB cut its benchmark interest rate from 1.5% to zero from 2011 to 2016 and started its stimulus program in March 2015. Unemployment in the 19-country eurozone has fallen from 12.1% in 2013 to 8.4% currently, with 8.4 million more people in work.
The researchers also found that people in the lowest fifth by wealth—with a median net worth of only €1,100—saw a gain of 2.5% after a year of stimulus, while the top fifth saw more modest increases of about 1%. A measure of inequality commonly used by economists, called the Gini coefficient, decreased slightly.
The European Central Bank is already getting ready to phase out at year-end its stimulus program. The stimulus is created by buying bonds from banks, which pushes newly created money into the financial system. The aim is to make borrowing cheaper in the wider economy, stimulating economic activity.

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