Fundamentals: Who are the winners in QE?
- The EPF Atlas
- Oct 3, 2025
- 4 min read
Quantitative Easing (QE) is one of the largest monetary experiments in modern history. In the most basic terms, this specific expansionary monetary policy involves the central bank buying back assets, increasing money supply and cutting down interest rates - the process by which the desirable result is higher aggregate demand and economic growth. However, the distributive effect of QE is complex.
The expansion of the central bank’s balance sheet in QE is often made through government bonds, mortgage-backed securities (MBS) or corporate assets. The first transmission channel of QE is portfolio balancing, where investors shift to riskier assets such as equities or real estates, inflating stock and property valuations and thus the wealth of asset holders. Secondly, the conventional transmission channel is through cheaper borrowing costs, which stimulate household consumption and firm investments in the economy, increasing aggregate demand and therefore real GDP.
Without QE, deflation, unemployment and economic recessions around the world could have been much worse. Studies by the IMF and the Bank of England estimate that QE programmes implemented after 2008 boosted GDP growth by 1-2 percentage points in advanced economies and prevented inflation from falling into deflation territory. From the labour market perspective, QE lowered unemployment by an estimated 1.5% during the ELB period, providing significant gains to lower-income households who are more vulnerable to job loss (Lee, 2024). The main challenge is not that QE failed, but that its benefits accrued unevenly.
Inflated equity and property valuations from expansionary monetary policies disproportionately benefit existing wealthy asset holders, rather than providing broad-based gains to the wider population. The effect on wealthy inequality is greater when QE is used compared to conventional easing policies such as rate cuts. When interest rates are cut in the short-term, borrowers (households or firms) gain as their debt burden decreases. On the other hand, QE worlds directly on the yield curve and asset markets, not just the overnight rate - therefore it has a stronger generational effect (i.e. it reinforces intergenerational and class-based wealth divides) than ordinary easing.
Firstly, we must first consider the general effects of expansionary monetary policy. According to the Federal Reserve’s Distributional Financial Accounts (DFA), the top 10% of US households own nearly 90% of corporate equities and mutual fund shares. When rates cut or QE lowers yields and pushes investors toward riskier assets, the price of equities surges thus amplifying the wealth of these already affluent groups. In contrast, middle and lower income households whose balance sheets are concentrated in housing and liquid savings saw far smaller proportional gain from these changes in market conditions. Research has shown that an expansionary monetary policy of 100 basis points cut increases the share of wealth in the top 10% and 1%, while reducing the share of wealth for the bottom 50% and 40% of the distribution. Overall, this 100 basis points cut increases the Gini coefficient of wealth inequality by 0.005 using Realtime data, and around 0.0015 using DFA data. (Medlin & Epstein, 2023).
The New York’s Fed model has found that QE specifically has a non-linear distributional effect. In this structural model calibrated to U.S. data, between 2009 and 2015 the use of quantitative easing (QE) and forward guidance raised profits by an average of 3.3 % and equity prices by 0.9 %, while lowering unemployment by 1.5 % - yet real wages rose by only 0.1 %. The top decile's income share increased by 0.17 percentage points during the effective lower bound (ELB) episode, driven primarily by profit and equity gains.
In addition to this class dynamic in a single country, QE policies also have an asymmetric effect between countries where the policies are being implemented and foreign nations due to their strong global spillover effect. A modest change in domestic interest rates typically influences credit growth and currency valuations within national borders, but large-scale asset purchases can alter global liquidity conditions. When yields are lowered in advanced economies, capital would be pushed toward emerging markets, producing cycles of rapid inflows followed by destabilising reversals when policy expectations shift.
In other words, QE of advanced economies such as the US fuels credit booms and local currency appreciation in emerging markets - yet when expectations shift as in the 2013 “taper tantrum”, these flows reverse abruptly, triggering currency depreciation, capital flight, and asset price volatility in countries such as India, Brazil, and Indonesia. During May to September 2013, U.S. Treasury yields rose by 100 basis points, while the Indian rupee and Indonesian rupiah lost around 15% of their value, and the Brazilian real depreciated by nearly 20% (IMF 2014; BIS 2014). In addition, capital inflows to major emerging markets contracted by more than $100 billion (World Bank 2015).
Generally, QE was designed as a last resort tool whose primary aim is to stabilise economies during periods of extraordinary stress - with an undesired side effect that is wealth redistribution. By boosting GDP growth, lowering unemployment, and preventing deflation, QE helped avert far deeper economic crises and provided tangible benefits to vulnerable households most at risk of job loss. In this sense, society as a whole “won” insofar as the policy safeguarded aggregate demand and maintained financial stability. However, the lesson is not to abandon QE, but to recognise its limits. Complementary measures such as fiscal policies and international coordination should be considered to ensure that the stabilisation it provides does not come at the cost of widening inequality and external vulnerability.
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