Inflation, nominal portfolios, and wealth redistribution in Canada

Césaire A. Meh and Yaz Terajima

Canadian Journal of Economics, 2011, vol. 44, issue 4, pages 1369-1402

Abstract: 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.

JEL-codes: D31 E31 (search for similar items in EconPapers)
Date: 2011
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