Household inequality and the transmission of QE in euro area countries

We estimate the dynamic effects of a high-frequency identified unionwide quantitative easing (QE) shock on real GDP, inflation and unemployment in all euro area countries. We document that the effects of QE are very heterogenous across countries as regards size, significance and timing, especially with respect to GDP and unemployment. Exploiting the panel structure of our dataset, we show that the effect of QE on real GDP is amplified by a larger fraction of liquidity-constrained households in a country. The latter result seems to be driven by the general equilibrium impact of QE on unemployment.