The Effect of Inflation on the Prices of Land And Gold
AbstractTraditional theory implies that the relative price of consumer goods and of such real assets as land and gold should not be permanently affected by the rate of inflation. A change in the general rate of inflation should, in equilibrium, cause an equal change in the rate of inflation for each asset price The experience of the past decade has been very different from the predictions of this theory: the prices of land, gold, and other such stores of value have increased by substantially more than the general price level. The present paper presents a simple theoretical model that explains the positive relation between the rate of inflation and the relative price of such real assets. More specifically, in an economy with an income tax, an increase in the expected rate of inflation causes an immediate increase in the relative price of such 'store of value' real assets. The behavior of real asset prices discussed in this paper is thus a further example of the non-neutral response of capital markets to inflation in an economy with income taxes.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0296.
Date of creation: Nov 1978
Date of revision:
Publication status: published as Feldstein, Martin, "Inflation, Tax Rules, and the Prices of Land and Gold." Journal of Public Economics, Vol. 14, No. 3, (December 1980), pp. 309-317.
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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.:
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in: Inflation, Tax Rules, and Capital Formation, pages 61-80
National Bureau of Economic Research, Inc.
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"Inflation and Taxes in a Growing Economy with Debt and Equity Finance,"
in: Research in Taxation, pages 53-70
National Bureau of Economic Research, Inc.
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0403, National Bureau of Economic Research, Inc.
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- Martin Feldstein, 1983. "Inflation, Tax Rules, and the Stock Market," NBER Chapters, in: Inflation, Tax Rules, and Capital Formation, pages 199-220 National Bureau of Economic Research, Inc.
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