Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/334927 
Year of Publication: 
2025
Series/Report no.: 
ECB Working Paper No. 3067
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
This paper investigates the impact of foreign exchange (FX) shocks on income inequality across 31 European countries from 2003 to 2021. Leveraging a unique database of household-level longitudinal data from the European Union Statistics on Income and Living Conditions (EU-SILC) and exchange rate data from the Bank of International Settlements, we investigate how currency devaluations and appreciations influence income distribution. Our findings indicate that a 1% currency devaluation decreases income inequality by 15 basis points within one year, while appreciations have the reverse effect. Contrary to previous studies focused on Latin America, which credit reductions in inequality to both labor mobility and union influence, our analysis identifies labor mobility as the primary factor in Europe. Furthermore, we discover that income changes are predominantly driven by variations in income per hour rather than hours worked.
Subjects: 
Foreign exchange
income inequality
labor mobility
EU-SILC
foreign currency
household income
social inequality
economic indicator
Europe
report
JEL: 
F31
F41
F44
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-7232-1
Document Type: 
Working Paper

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