Analytical Note - key findingsThe paper investigates the effect of monetary policy shocks on the distribution of wealth using a stylised model of the
New Zealand economy. We find that a 50 basis point reduction in the OCR leads to a more equal distribution of wealth in
the economy – with the Gini coefficient falling by approximately 0.5 percentage points.This drop occurs gradually and reaches its trough after 5 quarters, remaining persistently lower thereafter.
NB: The key missing channel in the model used in this Analytical Note is asset prices, which may also change following a
monetary policy shock - this is the portfolio composition (capital gains) channel, which will be investigated in future
work. In New Zealand there has been a sharp increase in house prices over the past 18 months, in part due to lower
mortgage interest rates. This research aims to take initial steps in analysing the distributional implications of low
interest rates by building a macroeconomic model that captures changes in savings and income flows of different
households. The version of the model used in this note does not yet capture the impact of capital gains, but future
versions will aim to cast more light on asset prices.About the research programme
The Reserve Bank is carrying out a wide range of research about the different ways changes in interest rates could
affect the distribution of wealth and income in New Zealand. Each research paper is aimed at giving the bank (and other
decision-makers) parts of the jigsaw puzzle, to help our understanding, rather than a complete picture all at once.Main fileAnalytical Note - Monetary Policy Easing and the Distribution of Wealth in New ZealandSupplementary fileTechnical appendix to Monetary Policy Easing and the Distribution of Wealth in New Zealand