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Ownership of Capital in Monetary Economies and the Inflation Tax on Equity

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  • Thomas F. Cosimano
  • Ralph Chami
  • Connel Fullenkamp

Abstract

Financial instruments are subject to inflation taxes on the wealth they represent and on the nominal income flows they provide. This paper explicitly introduces financial instruments into the standard stochastic growth model with money and production and shows that the value of the firm in this case is equal to the firm’s capital stock divided by inflation. The resulting asset-pricing conditions indicate that the effect of inflation on asset returns differs from the effects found in other papers by the addition of a significant wealth tax.

Suggested Citation

  • Thomas F. Cosimano & Ralph Chami & Connel Fullenkamp, 1999. "Ownership of Capital in Monetary Economies and the Inflation Tax on Equity," IMF Working Papers 99/167, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:99/167
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    1. Ralph Chami & Thomas F. Cosimano & Connel Fullenkamp, 2001. "Capital Trading, Stock Trading, and the Inflation Tax on Equity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(3), pages 575-606, July.

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