On Inflation as a Regressive Consumption Tax
AbstractEvidence on the portfolio holdings and transaction patterns of households suggests that the burden of inflation is not evenly distributed. We build a monetary growth model consistent with key features of cross- sectional household data and use this framework to study the distributional impact of inflation. At the aggregate level, our model economy behaves similarly to standard monetary growth models within the representative agent abstraction. Inflation has, however, important distributional effects since it is effectively a regressive consumption tax. Thus, neglecting the distributional consequences of inflation may prove misleading in assessing the effects of inflation in our economy.
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Bibliographic InfoPaper provided by University of Western Ontario, Department of Economics in its series UWO Department of Economics Working Papers with number 20001.
Date of creation: 2000
Date of revision:
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Postal: Department of Economics, Reference Centre, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2
Phone: 519-661-2111 Ext.85244
Web page: http://economics.uwo.ca/research/research_papers/department_working_papers.html
Other versions of this item:
- NEP-ALL-2000-04-17 (All new papers)
- NEP-DGE-2000-04-17 (Dynamic General Equilibrium)
- NEP-PBE-2000-04-17 (Public Economics)
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