Inequality, inflation, and central bank independence
AbstractWhat can account for the different contemporaneous inflation experiences of various countries, and of the same country over time? We present an analysis of the determination of inflation from a political economy perspective. We document a positive correlation between income inequality and inflation and then present a theory of the determination of inflation outcomes in democratic societies that illustrates how greater inequality leads to greater inflation, owing to a desire by voters for wealth redistribution. We conclude by showing that democracies with more independent central banks tend to have better inflation outcomes for a given degree of inequality.
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Bibliographic InfoPaper provided by Federal Reserve Bank of Dallas in its series Working Papers with number 9705.
Date of creation: 1997
Date of revision:
Other versions of this item:
- Jim Dolmas & Gregory W. Huffman & Mark A. Wynne, 2000. "Inequality, inflation, and central bank independence," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 271-287, February.
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- H0 - Public Economics - - General
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