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Inflation and Wealth Distribution

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Author Info
Burkhard Heer ()
Bernd Suessmuth ()

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Abstract

The effect of a permanent change of inflation on the distribution of wealth is analyzed in a general equilibrium OLG model that is calibrated with regard to the characteristics of the US economy. Poor agents accumulate savings predominantly in the form of money, while rich agents participate in the stock market and accumulate equity. Surprisingly, an increase of inflation results in a lower stock market participation rate; in addition, the distribution of wealth becomes more unequal, even though the quantitative effect is economically negligible. Furthermore, we show that the welfare costs of anticipated inflation are considerably lower than in Imrohoroglu (1992).

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number CESifo Working Paper No. 835.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_835

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Related research
Keywords: inflation; welfare costs; wealth distribution; stock market participation;

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Huggett, Mark, 1996. "Wealth distribution in life-cycle economies," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 469-494, December. [Downloadable!] (restricted)
  2. Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181. [Downloadable!] (restricted)
  3. John Y. Campbell & João F. Cocco & Francisco J. Gomes & Pascal J. Maenhout, 2001. "Investing Retirement Wealth: A Life-Cycle Model," NBER Chapters, in: Risk Aspects of Investment-Based Social Security Reform, pages 439-482 National Bureau of Economic Research, Inc. [Downloadable!]
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  4. He, Hua & Modest, David M, 1995. "Market Frictions and Consumption-Based Asset Pricing," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 94-117, February. [Downloadable!] (restricted)
  5. Heer, Burkhard, 2001. " Wealth Distribution and Optimal Inheritance Taxation in Life-Cycle Economies with Intergenerational Transfers," Scandinavian Journal of Economics, Blackwell Publishing, vol. 103(3), pages 445-65, September. [Downloadable!] (restricted)
    Other versions:
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Burkhard Heer & Alfred Maussner, 2006. "Business Cycle Dynamics of a New Keynesian Overlapping Generations Model with Progressive Income Taxation," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  2. Bhattacharya, Joydeep, 2003. "Monetary Policy And The Distribution Of Income," Staff General Research Papers 11072, Iowa State University, Department of Economics. [Downloadable!]
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