Monetary policy, heterogeneous population and inflation

Turdaliev, Nurlan

doi:10.1016/j.rie.2019.08.002

Cited by 2 publications

(2 citation statements)

References 26 publications

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“…The calibrated model by Turdalie (2019) indicates that the implied optimal inflation rates are much higher than those observed in the data. One possible interpretation of the results is to question the recent general assumption of inequality as part of central banks' concerns.…”

Section: Introduction Literature Reviewmentioning

confidence: 73%

Analysis of the inflationary redistribution of consumption and wealth, evidence from Hungary

Sipiczki¹,

Dolgos²,

Varga

2023

AOecon

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Fluctuating prices can cause unintended redistribution of income and wealth, which may be particularly painful to lower income households. Our study examines the indirect effects of this redistribution in an empirical way: it focuses on the capital market distortions of inflation and the disparities in wealth and income. Consumer Price Index (CPI) measures average inflation. However, households feel different inflation rates because their expenditure patterns are different from the ‘average’ patterns. We used the Kruskal – Wallis H test to determine if there are statistically significant differences between low- and high-income households. We calculated alternative inflation rates based on income deciles' different consumption basket. The study finds that households with low income often feel higher inflation than in the actual price indices published by the statistical offices. As our research shows, individuals in different wealth deciles perceive significantly different inflation. Our results also provide important information for economic policymakers, because if social groups perceive different inflation, it modifies the expected behaviour of the population, thereby weakening the economic policy effectiveness of different decisions.

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Section: Introduction Literature Reviewmentioning

confidence: 73%

Analysis of the inflationary redistribution of consumption and wealth, evidence from Hungary

Sipiczki¹,

Dolgos²,

Varga

2023

AOecon

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“…Specifically, the welfare gain is between 13 − 33 % larger in heterogeneous productivity cases than in its homogeneous counterpart. As a result, the heterogeneous productivity levels, which generate income inequality, form the second channel for redistribution (see, Crowe, 2006; Desai et al, 2005; Dolmas et al, 2000; Turdaliev, 2019 as the existing empirical and theoretical literature for the positive relationship between income inequality and inflation.). In other words, this finding suggests that the policy planner can achieve more welfare gain by generating higher inflation when there is income inequality.…”

Section: Introductionmentioning

confidence: 99%

Surprise by Anticipated Inflation

Asfuroglu

2024

Sage Open

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This paper proposes a theoretical model with two types of households to explore the distributional effects of inflation, assess the non-neutrality of money; and in return, to provide a guideline for policymakers in setting inflation rate. An impatient borrower who faces a borrowing constraint holds a positive amount of debt in equilibrium while a patient lender engages in consumption smoothing. Hence, inflation affects net worth of borrowers via nominal debt by redistributing resources away from lender, rendering welfare gains for the borrower and losses for the lender; and the structure of borrowing constraint gives rise to non-neutrality of anticipated inflation. The utilitarian welfare gain from generating inflation in a cashless economy is amplified when heterogeneous productivity levels are assumed. Yet, incorporating money demand in the form of money-in-utility model suggests that an inflation tax as an additional distortion reverses the overall positive effect of generating inflation in the cashless economy. JEL Classifications: E31, E37, E41, E52, D63.

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Monetary policy, heterogeneous population and inflation

Cited by 2 publications

References 26 publications

Analysis of the inflationary redistribution of consumption and wealth, evidence from Hungary

Analysis of the inflationary redistribution of consumption and wealth, evidence from Hungary

Surprise by Anticipated Inflation

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