This paper quantifies the redistributional effects of inflation in Canada that arise through the revaluation of nominal assets and liabilities. We find that the effects are non-trivial even for low inflation episodes. The main winners are young, middle-class households with mortgage debt. The government receives a windfall gain from its long-term debt. The old, the rich or the middle-aged, middle-class lose, largely owing to their holdings of bonds and non-indexed defined benefit pension assets. Finally, our Canada-U.S. comparison reveals that the extent of redistributions can be quite different even between countries of similar economic and legal environments.
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