In general, households in the highest percentiles of the income distribution tend to have greater financial wealth and a larger share of income derived from financial assets. If an expansionary monetary policy has positive wealth effects, it would lead to a widening of the income distribution.
In the same vein, if financial markets are fragmented, an expansionary monetary policy may contribute to widening the income distribution by redistributing wealth from individuals who do not trade in financial markets to those who trade frequently in financial markets and tend to have higher incomes.7 On the other hand, however, a decline in house prices is hurting low and middle-income households disproportionately, as their wealth tends to be concentrated in housing.8 So what about the empirical relevance of these various channels?