Quantitative Easing: Present-Day Robin Hood? Evaluating its effect on wealth dispersion in the Netherlands.

In the wake of the Eurozone crisis and the GFC, central banks have declined their short-term interest rates to remarkably low levels, with the aim of lifting up the economic system. At some point, these rates kept stuck at the effective lower bound and economic growth slacked, pushing central banks into other, more unconventional measures, with Quantitative Easing (QE) being one of them. As QE is an effective tool in lowering the yield curve and boosting asset prices, this has spiked the debate on whether QE has (partially) contributed to increased wealth dispersion, thus presenting itself as a “reversed Robin Hood”. To evaluate whether these concerns are legitimate, this thesis tries to assess the impact of QE on wealth dispersion in the Netherlands over the period 2015-2023. First of all, the effect on two major drivers of wealth dispersion is estimated, namely housing wealth and financial assets, before evaluating the impact on total wealth inequality, thereby using the P90/P50 ratio and the Gini Index of wealth. The former two are estimated for both the richest decile and bottom 50% of the Dutch wealth allocation, to assess whether changes in inequality are attributable to changes in these specific components of wealth. Exploiting a SVAR model framework with zero- and sign restrictions introduced by Arias et al. (2018) and confirmed by the robustness checks in this paper, I find that wealth inequality significantly decreases in the Netherlands in response to a positive QE shock: the larger increase in housing wealth for the bottom 50% more than offsets the larger increase in financial wealth for the top 10%. However, as the results are only applicable to the P90/P50 ratio and the Gini Index of wealth, they should not be projected onto other wealth inequality measures. Due to the limited availability of data at this point, this will thus be left for future research.