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Has Euro Area Monetary Policy Become Redistribution by Monetary Means? ‘Unconventional’ Monetary Policy as a Hidden Transfer Mechanism

This article takes an unconventional perspective on Eurosystem monetary policy by asking what kind of redistributive effects it might have had. Any monetary policy can have redistributive effects as it alters the environment in which economic agents, households and companies, operate. Some benefit and some stand to lose from decisions by the central bank. However, monetary policy generally does not aim at redistributive implications; indeed, in the Euro area context it does not have a mandate to do so. Against this background it is not irrelevant how the large number of Eurosystem monetary policy measures during crises should be assessed. The article claims that in particular the government bond purchase programmes by the Eurosystem and massive liquidity support to banks could have had redistributive elements even in a prominent role. The Eurosystem has become the final guarantor of Member States in trouble and their banking sectors, even reinforcing the link between the two. This focus has potentially pushed the Eurosystem to neglect its primary objective but also its broader implications for the Euro area economy and societies more generally.