Monetary Policy and the Dynamics of Wealth Inequality
This project looks to determine the effect of monetary policy on wealth inequality in the United States. The author seeks to add to the literature demonstrating how portfolio heterogeneity is an important driver of wealth inequality. One contribution of the research is the use of the Distributional Financial Accounts. This dataset, collected by the Federal Reserve, reconciles the definitions of wealth between the Fed’s Survey of Consumer Finances and the quarterly flow of data from its Z.1 Financial Accounts of the United States, and then combines the datasets to create a series that tracks wealth for four quantile bins of households by wealth at a quarterly frequency. A key strength of the Distributional Financial Accounts is the ability to decompose quarterly wealth data into component asset and liability classes, allowing for the study of the channels by which monetary policy affects wealth for different groups of U.S. households.