Inflation-Inequality Puzzle: Is it Still Apparent?

Edmond Berisha (), Orkideh Gharehgozli () and Rangan Gupta
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Edmond Berisha: Feliciano School of Business, Montclair State University, Montclair, NJ 07043
Orkideh Gharehgozli: Feliciano School of Business, Montclair State University, Montclair, NJ 07043

No 202206, Working Papers from University of Pretoria, Department of Economics

Abstract: US economy is facing inflation jump, which is running at 30 year high. Using inequality and inflation data that are available at a high frequency, i.e. on a quarterly basis for over 30 years, we find evidence that inflation causes swings in income distribution rapidly. The dynamic response of inequality to changes in inflation alters over a fourquarter period. We show that the contemporaneous impact of inflation on inequality is negative; however, after three quarters the impact becomes positive and stronger in magnitude. From our results we learn that over a one year period, higher inflation would exacerbate income inequality in USA. The positive impact of inflation on income inequality is stronger when inflation rate, initially, is above the sample average.

Keywords: Inflation; Inequality; United States (search for similar items in EconPapers)
JEL-codes: D60 O40 O50 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2022-01
New Economics Papers: this item is included in nep-cwa, nep-mac and nep-mon
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Journal Article: Inflation–inequality puzzle: is it still apparent? (2024)
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