Does the ECB's monetary policy affect personal finances and economic inequality? A household perspective from Germany

Abstract

Despite a growing academic literature on the distributional effects of monetary policy (MP), little is known about how laypersons perceive the effects of MP on their own economic situation and national economic inequality. This study examines laypersons' perceptions in Germany of the impact of the ECB's MP on (i) their personal economic situation and (ii) national economic inequality, using representative survey data collected in 2018. I review the existing academic literature, which identifies various characteristics of individuals that could potentially render them susceptible to the effects of monetary policy, such as savings, wealth, home ownership, debt, unemployment, or age. I then investigate whether these characteristics align with layperson's perceptions. Ordered logit analysis shows that, contrary to the economic literature, most variables - with the exception of 'savers' - appear to be irrelevant to laypersons' perceptions. Instead, factors such as objective knowledge of monetary policy, trust in the ECB, party affiliation and residence in East Germany emerge as significant factors.