Navigating the Well-Being Effects of Monetary Policy: Evidence from the Euro Area

December 1, 2023

Preview Citation

Format: Chicago

Mehdi El Herradi, and Aurélien Leroy. Navigating the Well-Being Effects of Monetary Policy: Evidence from the Euro Area, (USA: International Monetary Fund, 2023) accessed December 22, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Central banks have recently adjusted their communication strategies to enhance engagement with the general public, yet there is limited understanding of public sentiment regarding monetary policy announcements. This paper investigates whether monetary policy announcements influence household (subjective) well-being in Germany over the period 2002-2018 and finds that tightening surprises reduce life satisfaction. Notably, the impact of a one standard deviation monetary policy shock on well-being is equivalent to a 4% decline in household income. This effect is particularly pronounced among middle-aged individuals and those belonging to the middle-class.

Subject: Aging, Asset prices, Education, Health, Income, National accounts, Population and demographics, Prices

Keywords: Aging, Asset prices, Euro Area, Global, IMF working paper 23/248, Income, Monetary policy, Monetary policy announcement, Monetary policy surprise, Standard deviation monetary policy shock, Subjective Well-Being, Survey data, Well-being effect

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/248
Stock No:

WPIEA2023248
ISBN:

9798400260674
ISSN:

1018-5941

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