Inflation, nominal portfolios, and wealth redistribution in Canada

Césaire A. Meh and Yaz Terajima

Canadian Journal of Economics/Revue canadienne d'économique, 2011, vol. 44, issue 4, 1369-1402

Abstract: 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. Ce texte quantifie les effets de redistribution de la richesse de l’inflation au Canada attribuable à la réévaluation des actifs et des dettes nominaux. On découvre que ces effets ne sont pas insignifiants même pour des épisodes de faible inflation. Le gouvernement encaisse un gain inattendu de sa dette à long terme. Les plus vieux, les riches ou la classe moyenne d’âge moyen essuient des pertes à cause des obligations qu’ils détiennent et des actifs non‐indexés dans leurs régimes de rentes à prestations définies. Finalement, les comparaisons Canada‐États‐Unis montrent que l’importance de la redistribution peut être fort différente même entre deux pays où les environnements économiques et légaux se ressemblent.

Date: 2011
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https://doi.org/10.1111/j.1540-5982.2011.01678.x

Related works:
Journal Article: Inflation, nominal portfolios, and wealth redistribution in Canada (2011)
Working Paper: Inflation, Nominal Portfolios, and Wealth Redistribution in Canada (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:canjec:v:44:y:2011:i:4:p:1369-1402

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