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Aggregate and Welfare Effects of Redistribution of Wealth Under Inflation and Price-Level Targeting

Author

Listed:
  • Yaz Terajima

    (Bank of Canada)

  • Jose-Victor Rios-Rull

    (University of Minnesota)

  • Cesaire Meh

    (Bank of Canada)

Abstract

consequently, have different redistributional properties which is what we explore in this paper. For Canada, which has a positive net asset position with respect to the rest of the world in Canadian dollar-denominated claims, we show that the magnitude of the effects of an unexpected price level increase under IT is larger than under PT. Households’ wealth loss from a price level increase is matched by the gains of the government and foreigners. Even though this redistribution is zerosum, we observe positive effects on GDP due to the wealth loss, the lower value of the debt and its associated fiscal adjustment, and the non-linear effects on work effort of the redistribution of wealth across households. Although the effects on GDP are positive, the direction of the change in the weighted welfare of households depends on the fiscal policy.

Suggested Citation

  • Yaz Terajima & Jose-Victor Rios-Rull & Cesaire Meh, 2008. "Aggregate and Welfare Effects of Redistribution of Wealth Under Inflation and Price-Level Targeting," 2008 Meeting Papers 381, Society for Economic Dynamics.
  • Handle: RePEc:red:sed008:381
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy

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