Inflation as a redistribution shock
Subtitle: effects on aggregates and welfare
By: Matthias Doepke, Martin Schneider
Contributors: Schneider, Martin (Professor of economics); National Bureau of Economic Research
Series: NBER working paper series -- working paper 12319; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 12319.
Publisher: National Bureau of Economic Research
Published: 2006
Place of publication: Cambridge, MA
Language: eng
Format: [electronic resource] :
Description: "Episodes of unanticipated inflation reduce the real value of nominal claims and thus redistribute wealth from lenders to borrowers.  In this study, we consider redistribution as a channel for aggregate and welfare effects of inflation.  We model an inflation episode as an unanticipated shock to the wealth distribution in a quantitative overlapping-generations model of the U.S.  economy.  While the redistribution shock is zero sum, households react asymmetrically, mostly because borrowers are younger on average than lenders.  As a result, inflation generates a decrease in labor supply as well as an increase in savings.  Even though inflation-induced redistribution has a persistent negative effect on output, it improves the weighted welfare of domestic households"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 6/29/2006.

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