On inflation as a regressive consumption tax

Andrés Erosa, Gustavo Ventura

Research output: Contribution to journalArticlepeer-review

117 Scopus citations

Abstract

Evidence on the portfolio holdings and transaction patterns of households suggests that the burden of inflation is not evenly distributed. We build a monetary growth model consistent with key features of cross-sectional household data and use this framework to study the distributional impact of inflation. At the aggregate level, our model economy behaves similar to standard monetary growth models within the representative agent abstraction. Inflation has, however, important distributional effects since it is effectively a regressive consumption tax. Thus, neglecting the distributional consequences of inflation may prove misleading in assessing the effects of inflation in our economy.

Original languageEnglish (US)
Pages (from-to)761-795
Number of pages35
JournalJournal of Monetary Economics
Volume49
Issue number4
DOIs
StatePublished - 2002
Externally publishedYes

Keywords

  • Distribution
  • Heterogeneity
  • Inflation

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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