Navigating the well-being effects of monetary policy: Evidence from the European Central Bank

Abstract

This paper assesses whether monetary policy announcements have an impact on households’ (subjective) well-being by analysing life satisfaction on the days before and after monetary surprises in Germany. To do so, we use individual-level information on life satisfaction from the German Socio-Economic Panel (SOEP) survey and identify the day on which each answer is submitted to the survey. We also exploit the Euro Area Monetary Policy event study Database (EA-MPD) to obtain daily-level information on European Central Bank (ECB) monetary surprises. Our results show that life satisfaction is significantly affected by monetary policy surprises: tightening surprises decrease life satisfaction, while easing surprises increase it.