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On the Redistributional Effects of Long-Run Inflation in a Cash-in-Advance Economy

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  • Kakar, Venoo
Abstract
This paper analyses the redistributional effects of long-run inflation on income, wealth and consumption in the United States in a model economy with heterogeneous agents where money is introduced via a cash-in-advance constraint. In the case with transfers, we find that consumption inequality reduces as inflation increases since the low income households hold a relatively higher cash-wealth ratio. The bottom 60% of the population gains and the top 40% loses. In the case without transfers, we find that all income groups lose with the losses being more pronounced in the low income households.

Suggested Citation

  • Kakar, Venoo, 2014. "On the Redistributional Effects of Long-Run Inflation in a Cash-in-Advance Economy," MPRA Paper 55687, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:55687
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    References listed on IDEAS

    as
    1. Gabriele Camera & Yili Chien, 2014. "Understanding the Distributional Impact of Long‐Run Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 46(6), pages 1137-1170, September.
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    14. Stockman, Alan C., 1981. "Anticipated inflation and the capital stock in a cash in-advance economy," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 387-393.
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    More about this item

    Keywords

    Consumption; Inequality; Inflation; Heterogeneity;
    All these keywords.

    JEL classification:

    • 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
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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