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Inflation and Wealth Distribution

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  • Burkhard Heer
  • Bernd Süssmuth

Abstract

The effect of a permanent change of inflation on the distribution of wealth is analyzed in a general equilibrium OLG model that is calibrated with regard to the characteristics of the US economy. Poor agents accumulate savings predominantly in the form of money, while rich agents participate in the stock market and accumulate equity. Surprisingly, an increase of inflation results in a lower stock market participation rate; in addition, the distribution of wealth becomes more unequal, even though the quantitative effect is economically negligible. Furthermore, we show that the welfare costs of anticipated inflation are considerably lower than in Imrohoroglu (1992).

Suggested Citation

  • Burkhard Heer & Bernd Süssmuth, 2003. "Inflation and Wealth Distribution," CESifo Working Paper Series 835, CESifo.
    • Handle: RePEc:ces:ceswps:_835
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    References listed on IDEAS

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    Cited by:

    1. Bhattacharya, Joydeep, 2003. "Monetary Policy And The Distribution Of Income," Staff General Research Papers Archive 11072, Iowa State University, Department of Economics.
    2. Hoover, Gary A. & Giedeman, Daniel C. & Dibooglu, Sel, 2009. "Income inequality and the business cycle: A threshold cointegration approach," Economic Systems, Elsevier, vol. 33(3), pages 278-292, September.
    3. Burkhard Heer & Alfred Maussner, 2006. "Business Cycle Dynamics of a New Keynesian Overlapping Generations Model with Progressive Income Taxation," CESifo Working Paper Series 1692, CESifo.
    4. Nikolaos Papanikolaou, 2020. "Markov-Switching Model of Family Income Quintile Shares," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 48(2), pages 207-222, June.

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