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Inflation and income inequality: Does the level of income inequality matter?

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  • Edmond Berisha
  • Ram Sewak Dubey
  • Orkideh Gharehgozli

Abstract

In the recent times of global Covid pandemic, the Federal Reserve has raised the concerns of upsurges in prices. Given the complexity of interaction between inflation and inequality, we examine whether the impact of inflation on inequality differs among distinct levels of income inequality across the US states. Results reveal that there is a negative contemporaneous effect of inflation on the inequality which becomes stronger with higher levels of income inequality. However, over a one year period, we find higher inflation rate to further increase income inequality only when income inequality is initially relatively low.

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  • Edmond Berisha & Ram Sewak Dubey & Orkideh Gharehgozli, 2022. "Inflation and income inequality: Does the level of income inequality matter?," Papers 2202.05743, arXiv.org.
    • Handle: RePEc:arx:papers:2202.05743
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    Cited by:

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    2. Ayoub Rabhi & Brandon Parsons, 2024. "How is Central Bank Independence Shaping Income Inequality in Developing Countries?," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 30(2), pages 159-176, May.

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