Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/311164 
Year of Publication: 
2024
Series/Report no.: 
ECB Working Paper No. 2998
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
During the COVID-19 pandemic, governments in the euro area sharply increased spending while the European Central Bank eased financing conditions. We use this episode to assess how such a concerted monetary-fiscal stimulus redistributes welfare between various age cohorts. Our assessment involves not only the income side of household balance sheets (mainly direct effects of transfers) but also the more obscure financing side that, to a substantial degree, occurred via indirect effects (with a prominent role of the inflation tax). Using a quantitative life-cycle model, and assuming that the deficit was partly unfunded by future taxes, we document that young households benefited from the stimulus, while middle-aged and older agents mainly paid the bill. Crucially, most welfare redistribution was due to indirect effects related to macroeconomic adjustment that resulted from the stimulus. As a consequence, even though all age cohorts received significant transfers, the welfare of some actually decreased.
Subjects: 
COVID-19
Fiscal expansion
Monetary policy
Redistribution
JEL: 
E31
E51
E52
H5
J11
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-6894-2
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.