On the Redistributive Effects of Inflation: an International Perspective
AbstractI use a microfounded model of money to quantify the redistributive effects of expected inflation in a sample of OECD countries. In doing so, I address two quantitative issues. First, I pin down money demand rigorously, which implies accounting for the possibility of policy breaks. I show that this has significant implications for both the quality of the fit as well as the measurements' values. Second, I construct comparable estimates of wealth distribution across countries by using harmonized microdata from the Luxembourg Wealth Study. Two main results emerge from the analysis. First, in all countries considered inflation acts as a regressive tax. Second, the magnitude of such redistributive effects differs across countries and it depends not only on wealth distribution, but also on the curvature and the level of money demand for any given interest rate.
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Bibliographic InfoPaper provided by Sveriges Riksbank (Central Bank of Sweden) in its series Working Paper Series with number 274.
Length: 34 pages
Date of creation: 01 Sep 2013
Date of revision: 01 Nov 2013
Money; Heterogeneity; Redistribution; Calibration; Welfare Cost of In ation;
Find related papers by JEL classification:
- E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
- E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-02 (All new papers)
- NEP-CBA-2013-11-02 (Central Banking)
- NEP-DGE-2013-11-02 (Dynamic General Equilibrium)
- NEP-MAC-2013-11-02 (Macroeconomics)
- NEP-MON-2013-11-02 (Monetary Economics)
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