@article{64624835779e4daf932e89a478d07726,
title = "On inflation as a regressive consumption tax",
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.",
keywords = "Distribution, Heterogeneity, Inflation",
author = "Andr{\'e}s Erosa and Gustavo Ventura",
note = "Funding Information: Earlier versions of the paper circulated under the title “Inflation, Heterogeneity and Costly Credit: How Regressive is the Inflation Tax?”. We have benefited substantially from the comments of Fernando Alvarez, David Andolfatto, Paul Beaudry, Roland Benabou, Dan Bernhardt, Jeff Campbell, Harold Cole, John Knowles, Narayana Kocherlakota, Per Krusell, and Victor R{\'ı}os-Rull. We also thank seminar participants at the 1999 Northwestern Summer Macro Conference, Cleveland Fed, Rochester, Western Ontario, Minneapolis Fed, Southern California, SUNY-Buffalo, Illinois, Toronto, Pompeu Fabra, ITAM, British Columbia, Richmond Fed, Atlanta Fed, Universidad San Andr{\'e}s, 1999 SED Meetings, 2000-ITAM Conference on the Consequences of Financial Crises on Income Distribution, and 1999 Econometric Society Meetings – Cancun. Both authors thank financial support from the Social Science and Humanities Research Council. Part of this paper was completed while Erosa was affiliated with Western Ontario. He thanks financial support from the Spanish Ministry of Science and Technology through grant SEC 2000-0684. Shannon Seitz provided excellent research assistance. All errors are ours. ",
year = "2002",
doi = "10.1016/S0304-3932(02)00115-0",
language = "English (US)",
volume = "49",
pages = "761--795",
journal = "Journal of Monetary Economics",
issn = "0304-3932",
publisher = "Elsevier",
number = "4",
}