The non-monotonic relationship between seigniorage and inequality
AbstractWe present an analysis of how political factors may come into play in the equilibrium determination of inflation. We employ a standard overlapping generations model with heterogenous young-age endowments, and a government that funds an exogenous spending via a combination of non-distortionary income taxes and the inflation tax. Agents have access to two stores of value: fiat money and an inflation-shielded, yet costly, asset. The model predicts that the relationship between elected reliance on the inflation tax (for revenue) and income inequality may be non-monotonic. We find robust empirical backing for this hypothesis from a cross-section of countries.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 38 (2005)
Issue (Month): 2 (May)
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Other versions of this item:
- Bhattacharya, Joydeep & Bunzel, Helle & Haslag, Joseph, 2003. "The Non-Monotonic Relationship Between Seigniorage and Inequality," Staff General Research Papers 10252, Iowa State University, Department of Economics.
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism
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