Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/103821
Authors: 
Boel, Paola
Year of Publication: 
2013
Series/Report no.: 
Sveriges Riksbank Working Paper Series 274
Abstract: 
I calibrate the microfounded model in Boel and Camera (2009) to quantify the redistributive effects of inflation for a sample of OECD countries. In doing so, I address two important quantitative issues. First, using harmonized microdata from the Luxembourg Wealth Study, I provide an international comparison of the distribution of households' deposit accounts and financial assets. Second, I account for structural breaks when estimating money demand. I find that several results hold for the countries considered. First, the welfare cost of inflation changes over time, but the direction of the change varies across countries. Second, inflation acts as a regressive tax when a nominal asset other than money is held. Third, the magnitude of the redistributive effects differs across countries and it depends not only on wealth inequality, but also on the curvature and the level of the money demand curve. Last, I show that a subset of the population always prefers an inflationary policy when I extend the model to incorporate a political-economy equilibrium where agents can bargain over the inflation rate.
Subjects: 
Money
Heterogeneity
Friedman Rule
Welfare Cost of Inflation
Calibration
JEL: 
E4
E5
Document Type: 
Working Paper

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