Quantitative Easing Impact on Financial Wealth Distribution

This paper presents a novel two-stage framework to examine the impact of Quantitative Easing (QE) on the distribution of household financial wealth in the UK and the US. In the first stage, robust econometric methods are used to estimate the effect of QE on domestic bond and equity markets via the Portfolio Balance Channel. In the second stage, it documents that equity market returns affect the growth of financial wealth differently across wealth deciles. It is shown that QE implemented between 2009 and 2012 coincided with a pronounced divergence in financial-wealth outcomes in the United States. During this period, the Top 1% of the financial wealth cohort consistently outperformed aggregate growth in financial wealth, whereas the Bottom 50% experienced persistent relative losses. Importantly, these effects do not self-correct after QE ends, suggesting that QE-induced wealth redistribution may be long-lasting. The UK exhibits similar patterns, though data limitations restrict the strength of causal inference. The paper contributes to the existing literature in three ways. First, it provides a transparent two-stage framework that clarifies the sequential link between QE, asset prices, and the distribution of financial wealth. Second, it shows that commonly used aggregate inequality measures can mask substantial distributional shifts concentrated at the top of the wealth distribution. Third, it demonstrates that the policy relevance of wealth-distribution effects is a potentially important yet under-acknowledged side effect of unconventional monetary policy.